Three of the biggest U.S. retailers have said maintaining in-stock levels was a challenge in first quarter 2015 because of West Coast port disruption.
Three of the biggest U.S. retailers have mentioned the fallout from the West Coast port disruption early this year as a headwind for meeting sales and financial targets in the first quarter.
Macy’s said congestion from the labor-related port slowdown that delayed merchandise deliveries to stores, severe winter weather, a strong dollar that dampened international tourist spending, and slowness adjusting to a reorganization aimed at improving omnichannel capabilities contributed to a 0.7 percent dip in first quarter sales compared to the same period a year ago.
The retail department store chain’s sales from January through March totaled $6.23 billion. Operating income was also lower, totaling $409 million, or 6.6 percent of sales, compared with $443 million, or 7.1 percent of sales in the first quarter of 2014.
“Early in the quarter, we felt the absence of fresh fashion on our floors. And at the end of the quarter, our customers missed the deep markdowns that would have been taken in prior years that hadn’t been taken this year because the shipments had just arrived,” Chief Financial Officer Karen Hogates said in an earnings call with analysts.
The port delays should not have an impact in the second quarter, she said.
Home Depot also said the bottlenecks at West Coast ports, which began to ease in mid-February after a tentative contract agreement between the longshoremen’s union and management, also made it difficult to keep some items properly stocked.
“We have had negative impact on our in-stock particularly for our direct import items, but we’ve also seen some hits to our fill rates from vendors and that has led to lower in-stock than we would like to see,” Mark Holifield, executive vice president for supply chain and product development, told analysts on Tuesday. “So our inventory probably is a little lower than we would like it to be given where it’s at, but that inventory is coming and it’s recovering as the ports have gotten a lot better.”
The world’s largest home improvement retailer posted revenues of $20.9 billion in the first quarter, up 6.1 percent over the same quarter in 2014. Net earnings were $1.6 billion versus $1.4 billion last year. Company officials attributed the positive results to the recovering housing market and a normal start to spring in large parts of the country.
Retail giant Walmart experienced flat revenues of $115 billion and an 8.3 percent decline in operating income to $5.7 billion in Q1 2015.
The company suffered stock-outs in some merchandise categories, such as TVs, as a result of the port problems, Walmart U.S. CEO Greg Foran said. Gross profit declined 0.13 percent, primarily due to spoilage and loss, but also because of incremental expenses related to the port congestion.
“We now believe the majority of this disruption is behind us,” Foran added.
Costco Wholesale also had to deal with the port disruption, but doesn’t envision changing its strategy to redirect more cargo from Asia to East Coast ports, John Thelan, Costco’s senior vice president of depots and traffic, said in an interview on the sidelines of a supply chain conference at the U.S. Chamber of Commerce last week.
East Coast ports have experienced a surge of cargo in the past year as retailers implemented contingency plans to bypass the West Coast port situation. But many shippers have indicated that they are considering a more permanent diversion of some cargo from the West Coast to East and Gulf coast ports because of concerns about reliability. The Port of Savannah, the nation’s fourth largest container report, reported April traffic was up more than 25 percent from April 2014 and is averaging about 14 percent more volume for the current fiscal year so far. The Port of Charleston’s container volume is up 15 percent for the first four months of the year compared to the same period in 2014, and the ports of Virginia and New York/New Jersey also are experiencing strong container growth.
An American Shipper research report in March showed that a third of retailers and a quarter of manufacturers surveyed said they planned to make structural changes to their supply chains and shift at least 20 percent of business to East Coast ports and distribution centers. And carriers have responded with six new Asia-to-East Coast services via the Panama and Suez canals in recent weeks.
Global management consulting firm Kurt Salmon estimates that congestion at West Coast ports could cost U.S. retailers $7 billion this year, although the figure is an attempt to quantifying the chronic, underlying congestion related to infrastructure and logistics limitations in the face of higher traffic, as opposed to just the backlogs associated with the short-term labor disruption.
Retailers say West Coast port congestion pressured Q1 sales
