Trader Talk

Who's at risk in the L.A. port slowdown

Pisani's market open: Germany rejects Greece
Pisani's market open: Germany rejects Greece

Piper Jaffray has an interesting report out this morning on the effects of the port slowdown in Los Angeles. While much of the discussion has been about the impact on perishable goods, as the dispute drags on, it is now impacting apparel and footwear.

Piper's concern is that even if the dispute is resolved in the next week, it will take six to eight weeks to smooth out the supply chain. This means Easter deliveries will be disrupted, impacting first-half margins.

The firm notes the biggest risks are in furniture, branded footwear, apparel and toys.

Read More US manufacturers feel the pain of port dispute

Branded footwear companies like Steve Madden, Wolverine World Wide, and Crocs are at risk because seasonal offerings move distinctly from boots to spring goods.

Toy companies like Mattel and Hasbro and household and beauty products makers such as Newell Rubbermaid, Jarden, and Williams Sonoma could also get hit. Piper estimates 50 percent of all these inbound products go through the L.A. ports.

Some companies with large order commitments for Easter in early April and licensed movie goods are electing to use air freight, which will produce margin pressures. Coupled with foreign exchange headwinds, the expectation is that guidance will be coming in on the light side.

Not everyone is so exposed, however. PVH Group already ships from the East Coast and is thus more immune to the slowdown.

Read MorePort fight costing us $400,000 a day: CEO

Some companies have been trying to react proactively. Piper notes that while Target is one of the most exposed retailers, the company "has been bringing in inventory early to help offset these potential slowdowns." As evidence, it notes that the inventory was up 7 percent on the company's last earnings call, well ahead of sales growth of 2 percent.

One potential beneficiary is close-out retailers, like Ross Stores. Piper notes that off-price retailers "are already starting to reduce first-season goods for 2H deliveries in anticipation that they will be the recipient of a lot of excess inventory when the product finally is discharged from the ports."