SAN FRANCISCO, Sept 17 (Reuters) - U.S. retailers already reeling from the U.S.-China trade war and an uncertain economic picture now have something else to fret about this holiday season - higher fuel prices.
A surge in energy prices after weekend attacks on Saudi Arabia's oil facilities has raised the specter of more expensive gasoline for U.S. consumers and steeper shipping costs for retailers, just as the crucial holiday shopping period approaches.
While oil prices partly recovered on Tuesday after a Saudi official told Reuters that production could recover within weeks, the possibility of an escalating Middle East crisis and prolonged higher energy prices has emerged just as Amazon.com Inc steps up competition with free one-day shipping.
Walmart Inc, which has its own trucking fleet with more than 8,000 U.S. drivers, and other retailers like Target Corp have been expanding their own online shopping and free-shipping offers to compete better against Amazon. All of these companies could face hits to their bottom lines if energy prices remain elevated.
At the same time, potentially higher gasoline prices could keep some consumers at home during the crucial holiday shopping period between Thanksgiving and Christmas, in some cases doing more of their shopping online.
The national average price of regular gasoline is currently $2.59 per gallon, down from $2.85 a year ago, according to the AAA, which warned on Monday that motorists should expect volatility in the coming weeks.
If gasoline prices rise substantially, "Consumers are far and away going to be attracted to more point-and-click shopping, but the cost of executing on its delivery promise will certainly dampen Amazon's profits," said Jack Ablin, chief investment officer at Cresset Wealth Advisors, which has shares of Amazon and Walmart.
The S&P 500 retailing index is down 1.2% since the weekend, compared to the S&P 500's 0.25% loss, reacting to increased uncertainty faced by retailers already wrestling with fallout from the U.S.-China trade war.
Store chains have been working for months on plans to ease the pain from new tariffs on products including apparel and electronics: adjusting their supply chains, pushing suppliers to bear part of the higher costs, and building inventory before tariffs kick in. Less flexible retailers will be forced to pass higher costs from the tariffs to consumers, who for years have been conditioned to expect deep holiday season discounts.
"As these price hikes go into effect, people are going to rethink their purchases, especially of elastic goods like apparel, home furnishings and consumer electronics," warned CFRA Research analyst Camilla Yanushevsky.
In another potential hiccup for retailers, the U.S. Thanksgiving holiday falls on Nov. 28 this year, leaving 26 days between the traditional start of the holiday shopping season and Dec. 24, which is Christmas Eve. Last year, Thanksgiving fell on Nov. 22, which meant a 32-day shopping season.
While the shift to online shopping and near permanent promotions have made the length of the holiday shopping period less important to overall retail spending, this year's shorter season could harm individual chains that are already struggling.
"Even if it's only a few days, you have less time to get it right. You've got less opportunity to make sure your strategy is working, so you've got to be even more nimble as a retailer in making sure you're selling through your product and that you've got the right promotions at the right time," said Neil Saunders, managing director of research firm GlobalData Retail.
While a report from the Commerce Department on Friday showed retail sales were solid in August, many economists worry the year-long trade war between the United States and China could cause a recession. Extended high oil prices would increase uncertainty for companies across the global economy.
When Fedex Corp reports its quarterly results late on Tuesday, investors will look for hints about how it and rival United Parcel Service Inc might be affected by higher fuel prices.
Amazon has built a delivery service that now includes over 45 aircraft, 10,000 trailers and outsourced drivers. As it ramps up its one-day delivery service, free for its Prime members, Amazon this month announced it was buying over 20,000 Mercedes-Benz vans.
"Amazon is the biggest loser from higher oil prices because they deliver free," said Bill Smead, chief executive officer of Smead Capital Management. (Reporting by Noel Randewich and Lisa Baertlein; Editing by Alden Bentley, Megan Davies and Lisa Shumaker)