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West Coast Slowdowns Could Affect Retailers' Q4Monday, December 15, 2014 > 11:21:53
(Journal of Commerce – Corianne Egan)
Delays in receiving holiday sale inventory will likely affect fourth-quarter results of some shippers as they incur the added costs of diverting cargo and lost sales.
In its earnings call this week, athletic apparel retailer Lululemon Athletica became the latest to lament U.S. West Coast congestion, saying it expects disruptions to reduce year-end revenue forecasts by $10 million. The company is currently experiencing seven to 10 day delays on goods shipped into the West Coast.
"Our business is sensitive to this disruption since we schedule a constant replenishment of our inventory and we still need product drawn at our store," CEO Laurent Potdevin said in a Dec. 11 earnings call, transcribed by Seeking Alpha. "With the slowdown at the West Coast port and units still underwater, we are actively implementing a number of strategies to mitigate the delivery issues."
Congestion at Los Angeles and Long Beach ports peaked in October, but hasn't eased even though the holiday shipping season is effectively over at the ports.
Lululemon CFO John Currie said the company, which relies heavily on stocking its distribution centers, had healthy inventory levels through November, but slowdowns that continued in December had made executives concerned that stocks were running low.
"We have about 1 million units that are stuck at the ports right now," Currie said. "But there's movement. They're coming through. It's not optimal, but we do see breaking that logjam, and we have rerouted subsequent shipments through Vancouver so that impact won't continue."
Several other retailers reported both third and fourth quarter earnings issues, including New York & Co., which incurred an extra $2 million in freight costs associated with switching to air freight and diverting cargo to U.S. East Coast ports. Chico's saw reduced holiday sales. GameStop said it was worried about receiving the full amount of hardware it had been allocated, which is in high demand this year.
"We monitor [the slowdown] daily to make sure our product flow will be here," President Tony Bartel said.
Companies like Ann Taylor, Lane Bryant, DSW, William Sonoma, Home Depot, Kohl’s, Best Buy and Lowe’s have all also expressed concern over delays and labor strife during third-quarter earnings calls.
Initially, the slowdowns were caused by growth in import levels, and the unavailability of chassis, but labor disputes between the Pacific Maritime Association and the International Longshore and Warehouse Union added to delays with work slowdowns and stoppages.