A Contradiction in the Cargo
Analysts have been raising their predictions for holiday spending ever since the back-to-school shopping season was stronger than most had expected.
But the people who work at the companies that ship and transport retailers’ goods are not nearly as optimistic about holiday sales.
When retailers expect that Americans will be crowding into their stores, their orders pile into the nation’s ports in August and September for delivery to stores by late October. But logistics companies say that is not happening this year.
“We’re concerned, because usually at this time, you see this peak,” said Richard D. Steinke, the executive director of the Port of Long Beach in California. “We haven’t seen it.”
In fact, the five busiest container ports in the United States said that imports in August 2011 were lower than or even with 2010 volumes.
In Long Beach, the second-busiest container port by volume, August imports fell by 14.2 percent from August 2010. While the port has not yet released September volumes, a spokesman, Art Wong, said it expected about a 15 percent drop from September 2010.
The reports from the remaining container ports in the top five were equally gloomy. In New York-New Jersey, the number of incoming containers in August was about flat with last year. In Savannah, Ga., imports in August fell by 4 percent. Oakland reported that August imports were down 0.9 percent from a year earlier. And Los Angeles, the nation’s highest-volume container port, counted 5.75 percent fewer containers in August than a year earlier.
“I expect over all the peak season will be muted,” said Kathryn McDermott, deputy executive director of business development for the Port of Los Angeles.
The holidays receive outsize attention, because sales in November and December tend to make up about a fifth of retailers’ sales for the whole year. And retail sales are a crucial indicator of economic health, given the importance of personal consumption in keeping the economy afloat.
In recent weeks, many retail analysts and trade groups have issued fairly positive forecasts about holiday sales.
Last Thursday, the National Retail Federation said it expected holiday sales to rise 2.8 percent over last year. And late last month, the federation said it expected port volumes to rise by at least 4.5 percent a month for the final four months of the year.
At the same time, some analysts revised their holiday forecasts upward after the retailers tracked by Thomson Reuters beat estimates and reported an average 5.1 percent increase in same-store sales for September last Thursday.
“For the holidays,” Craig R. Johnson, president of Customer Growth Partners, wrote in a note to clients last week, “a 5 to 6 percent increase is clearly in reach.”
On Monday, a Citigroup retail analyst, Deborah Weinswig, revised her holiday forecast up by a percentage point, saying she expected 4 percent to 5 percent gains in same-store sales at department stores, up from 3 percent to 4 percent. There is traditionally a strong correlation between the back-to-school and holiday seasons, Ms. Weinswig said. Some retailers are raising their prices because raw-material costs have gone up, she wrote, which would help sales. And the “surprisingly resilient” back-to-school season, she wrote, had led to “our more upbeat outlook.”
In contrast, the people who work at ports, and at train and trucking companies, say the shipments do not seem to be high enough to signal strong holiday sales.
Higher shipping volumes are “a prediction that sales are going to go up,” Mr. Steinke said. “The N.R.F. and some of those groups have said there’s going to be an increase in volume coming through the ports. When our August numbers are down and carriers say future loadings aren’t all that great, you wonder where that peak is coming from.”
While Mr. Steinke said that retailers occasionally delayed shipping for as long as possible to see how the economy progressed, he said they usually gave transportation companies a heads-up if they were planning a lot of last-minute orders. This year, he said, the retailers do not seem to be expecting that.
“We talk to the railroads, we talk to our ocean carriers, and they’re not seeing this big peak, or bracing themselves for a big late peak,” Mr. Steinke said.
Ms. McDermott of the Los Angeles port had a similar take.
“The N.R.F. came out with some numbers for strong growth, but I think what we’re seeing is consistent with the trends over all in the U.S.,” she said, and that is “some very small, maybe, or muted peak season, September, October, and then probably flat for the rest of the year.”
The slowdown seems to be occurring on land, too.
“We’re not seeing any real, significant peak,” said Steve Branscum, group vice president for consumer products marketing at the Burlington Northern Santa Fe Railway, referring to the company’s import business. The railway typically has increased imports in August through November. But this year, he said, “the last three months, July, August, September, our numbers have been pretty flat compared year over year to the same month, and the West Coast imports have been down a little bit.”
Mr. Branscum added: “If the economy’s going pretty strong and retailers are anticipating a very strong holiday season, then a lot of times they will start bringing in holiday goods sooner in the year than they otherwise would. If they have a little bit of uncertainty, or feel like there’s not going to be a real strong holiday season, they will wait a little later, and I think that’s the case this year.”
FedEx’s chairman and chief executive, Frederick W. Smith, said last week that shipping across the Pacific in June through August “was a bit lighter than we had thought it would be.” During that period, international priority shipments fell compared with a year earlier, the company said in its conference call in September. Alan B. Graf Jr., the chief financial officer, offered a detail. “Simply stated, we put capacity out anticipating traffic that did not materialize,” Mr. Graf said.
Mr. Smith said last week that “people have been very cautious about adding inventories with all of the uncertainty.” He added, “If they have cut it too tight, there will be a lot of lost sales.” Mr. Smith said FedEx was now expecting a 2.5 percent to 3 percent increase in holiday shipping volumes this year; in 2010, it had a 15.4 percent increase.
Joshua Owen, president of Ability/Tri-Modal Transportation Services, a trucking company based in Southern California, said the light volume and lack of a shipping peak did not surprise him.
“In reality, when people aren’t able to even afford homes, and they don’t have jobs, they’re not going to be buying a lot of creature comforts,” he said.