What do Martha Stewart, Big Steel, automakers, Planet Hollywood, trendy clothing manufacturers, software companies, Donald Trump and Scottish pubs have in common?
Each is blaming poor financial performance on the recent terrorist attacks. To
executives tell it, lagging attendance at the MGM film "Bandits," a dip in
burger sales at
Wendy's International Inc. and fewer portabello mushroom pies ordered at
Kitchen Inc. restaurants are explained by two words: Sept. 11.
Not since the Persian Gulf War a decade ago has business latched on to a single
uncontrollable event to account for lousy financial results. Airlines, hotels
and the TV
networks clearly were pummeled by fallout from the tragedy, but economists said
industries may be using the terrorist attacks as cover for long-standing
problems or as an
excuse for job cuts.
During the last two weeks, scores of companies have cited the attacks as having
their third-quarter earnings, although the quarter was more than 75% over when
came around. All this has economists and business analysts wondering what, if
companies legitimately can attribute to the attacks.
"There's no way of knowing, except in the most obvious cases," said Russell
economist at Washington University in St. Louis. "But it's a handy thing to
invoke as a
cause, even when it may have nothing to do with the results."
No doubt the attacks cut a wide swath through the economy. They created anxiety
consumers, threw a curve at corporate spending plans and kept potential
shoppers at home
to watch the latest news developments.
Although the attacks jolted the nation's business climate, skeptics point out
economy was sliding well before Sept. 11. And in many cases, companies citing
were having troubles anyway.
Take the Planet Hollywood International Inc. restaurant chain. The company
slowdown in tourism last month when it sought protection from creditors under
of the U.S. Bankruptcy Code. The trip to Bankruptcy Court was the company's
second in two
years and followed lengthy financial problems.
Likewise, Bethlehem Steel Corp. cited Sept. 11 as one of many reasons for its
filing in October. In a media release, the company said the attacks
"contributed to a
further weakening in demand for consumer products that rely on steel, such as
appliances and new homes, and to a worsening outlook for our near-term
Since 1998, the last full year Bethlehem posted a profit, the company has piled
billion in losses, largely because of competition from inexpensive steel
imports and the
"This is becoming the excuse du jour," said Richard Wynne, a bankruptcy lawyer
Kirkland & Ellis in Los Angeles who is not involved in the case of Planet
The Financial Accounting Standards Board, which oversees corporate accounting
touched off a controversy in September when it said companies couldn't
tied to the attacks as "extraordinary items" in their earnings announcements.
that has encouraged companies to lump together a wide-ranging list of previous
all the while suggesting that Sept. 11 contributed to their woes.
Expert says companies stretch the truth
Clouding the issue is that virtually every company can make an argument that
had some effect.
"There's no doubt Sept. 11 had some impact, but to try and lay primary blame on
it is a
stretch in many cases. Companies could list a lot of other things too," Harvard
School professor David Hawkins said.
Still, not everyone is blaming Sept. 11.
Software maker Electronic Data Systems Corp. expressed optimism in an earnings
saying that the events showed why its products are needed in emergencies.
Co. released a statement saying that while people were glued to TV sets
watching the news
after the attacks, "the company experienced a significant increase in consumer
of U.S. soup and sauces."
Campbell, like nearly every other company citing an impact from Sept. 11,
specifics, underscoring that many of the claims at this point have to be taken
"It all becomes very anecdotal. It's extremely hard to know the impact for any
company except for industries like financial services, the airlines or the
business," said Grady Means, a managing partner with accounting and consulting
Skeptics also said that companies deal with unusual events all the time, from
work stoppages, that don't get nearly the same attention as Sept. 11.
companies, for example, routinely have their box-office results skewed by
television events such as the Olympics.
That hasn't stopped a potpourri of businesses from at least trying to make a
they were in some way hurt by the terrorist attacks.
Palm Inc., the maker of Palm Pilots and other hand-held devices whose sales
have ebbed as
the economy and technology sector dipped, cited the attacks, as did clothing
Bauer Inc. and drugstore chain operator CVS Corp. Brown-Forman Corp. said "the
attacks have had a dramatic impact" on orders for its Lenox china and Hartmann
less so for its spirits, such as Jack Daniels.
MGM said it lost a few million dollars at the box office when middle-aged
to stay home instead of seeing the Bruce Willis comedy "Bandits" during its
weekend last month. But a rival movie, Warner Bros.' "Training Day," did fine.
MGM executives said youthful moviegoers, a target audience for "Training Day,"
affected by the tragic events.
Trendy footwear designers Steven Madden Ltd. and Kenneth Cole Productions Inc.
were hurt. Martha Stewart Living Omnimedia Inc., the umbrella company for the
maven, announced favorable earnings, but said it suffered a setback when news
preempted its TV shows.
Restaurants, pubs say they're hurting
Jack in the Box Inc. and California Pizza Kitchen said they saw fewer diners at
restaurants after the attacks. Sept. 11 was even cited as a principal reason
failure of the proposed sale of the historic Raymond Theater in Pasadena.
Even Scottish pubs weighed in. Paul Waterson, spokesman for the Scottish
Assn., at a convention of publicans bemoaned that business was down as much as
40% at some
"We know that Americans will not want to travel at this time, and even in this
people are feeling down," Waterson told the Glasgow Herald. "They don't seem to
out to the pub."
Blame it on Sept. 11, say scores of struggling firms
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