RETAILERS CUT BACK ON INVENTORIES

What does retailers cutting back on inventories do to container lines and the peak season?  Do it mean increased rate collapse and financial losses?

Retailers Scale Back After Big Inventory Buildups

Large retailers are still working through inventories built up in the first half of the year, which economists say could limit shipping ahead of the holidays.

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Containers are seen stacked up at the ports of Los Angeles and Long Beach. Photo: Reuters

By

Paul Page

Updated Sept. 25, 2015 4:06 p.m. ET

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Some major retailers say they still are trying to pare down inventories from big buildups earlier this year, potentially dampening prospects for a surge in shipping heading into the holiday season.
Inventories swelled in the second quarter as West Coast ports cleared backlogs of imports and exports that had pile dup during a labor dispute. Economists say the inventory expansion helped fuel strong growth in the spring. But a pullback by retailers and manufacturers may slow output through the rest of 2015.
The latest Global Port Tracker report by the National Retail Federation and Hackett Associates LLC projects only modest growth in container imports at U.S. gateways this fall. Freight rates for shipping from Asia, where the largest share of imported goods originate, have been at multi-year lows this year, reflecting the muted expectations and an oversupply of shipping capacity.

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Nike Inc. NKE -3.13 % said its inventories were up 10% year-over-year at the end of August, in part because of the rapid influx of goods as backlogs were cleared at West Coast ports.
“While the flow of product from the port has now returned to normal, we’re working to efficiently clear excess inventory to keep our in-line channel healthy,” said Trevor Edwards, president of Nike Brand.

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Pier 1 Imports said it has scaled back inventories that had expanded about 20% year-over-year earlier this year, largely because of what the retailer said were problems managing its supply chain, but that it still is working down stocks and restraining its purchasing.
“We will continue to feel the effects of our elevated inventory levels the remainder of this year,” Chief Executive Alex Smith said on an earnings call. “This is particularly frustrating and we are disappointed about the impact it’s having on our margins and profitability.”