The Biden administration is pulling out all stops to save Christmas. Global supply chain disruptions are sending prices higher and playing havoc with inventory. With Americans facing the prospects of emptier shelves and pricier toys this holiday season, the White House has turned to private sector heavyweights to help break the logjams.
Walmart, Target, Home Depot, FedEx, UPS and Samsung this week agreed to extend their working hours to help ease congestion at two key US ports. But unloading containers is just one piece of the puzzle. Labour shortages in other parts of the supply chain — including trucking, warehouses and rail freight — are impeding the movement of goods too.
Moreover, the extra 3,500 containers that the six companies are expected to move each week is tiny compared with the overall number. More than 950,000 containers went through the port of Los Angeles in August alone.
Shoppers should not fret yet. Behind the scenes, Walmart, Target and others with the financial means have taken drastic steps — including using air freight — to ensure shelves are stocked for the holidays.
Higher spending on logistics will weigh on margins. US retailers are expected to face an extra $223bn in costs as a result of logistics, labour and manufacturing headaches, according to Salesforce.
But large store chains with well-stocked shelves should come out on top if they can take business from smaller rivals. Tighter inventory should encourage Americans to start shopping sooner and reduce the need for discounting.
Investors appeared divided. The S&P Retail Select Industry index is up 45 per cent this year and hit a new high last month. But bearish bets are mounting. Short interest in the SPDR S&P Retail exchange traded fund has surged from 7 per cent of the ETF’s market cap in March to 120 per cent, according to IHS Markit data.
A better bet, though, would be on individual companies. Big retailers such as Target and Walmart will get bigger. For ailing ones such as Bed, Bath and Beyond, a supply chain squeeze is the last thing they needed.
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