US retailers scramble ahead of holidays amid port strike

By Savyata Mishra and Jessica DiNapoli

(Reuters) -Major U.S. retailers from Levi Strauss to Costco are preparing alternative shipping plans to ensure goods arrive in time for the peak holiday season as an East Coast and Gulf Coast ports strike drags on.

Long lines of container ships queued up outside major U.S. ports on Thursday as the biggest dockworker strike in nearly half a century entered its third day, preventing unloading and threatening shortages of everything from bananas to auto parts.

Retailers account for about half of all container shipping volume, with Walmart, IKEA, and Home Depot among those that heavily rely on the East Coast and Gulf Coast ports, according to eMarketer analyst Sky Canaves.

According to bill of lading data from Import Yeti, a data firm, some of the importers relying on affected ports range from IKEA to Walmart and Goodyear Tire & Rubber.

Jeans maker Levi, which gets most of its products into the United States through the East Coast from Asia, said it had made alternate plans, such as shifting routes to the U.S. West Coast, prioritizing certain ports and using air freight. As of November 2023, Levi had 1,172 company-operated stores in 37 countries, with 412 stores in the Americas.

Levi is not alone in this strategy. Costco had contingency plans in place including pre-shipping some products to get in holiday goods early and preparing to use different ports, it said last week.

Newell Brands, which makes cleaning equipment like Rubbermaid mops, garbage cans and buckets, contacted retailers like Walmart and Lowe's this week offering to step up production if necessary, said CEO Chris Peterson in an interview on Wednesday.

Atlanta-based Newell manufactures most Rubbermaid products domestically, while competitors may get held up at ports, Peterson said.

He said the retailers "will let us know if they need us to surge in and help." The manufacturer in the short-term could boost production of some goods by 50%, Peterson said. 

"We have safety stock built up," he said.

In the medium and longer term, the company could increase capacity by about 20%, he added. 

SUPPLY CHAIN CHALLENGES

Coffee is among the goods arriving to the United States through the East Coast ports, with shipments already disrupted and prices rising. 

Folgers coffee maker J.M. Smucker said it had strategies in place to address potential supply chain challenges such as confirming the amount of inventory it already has available to ship to retailers, adjusting production plans to maximize manufacturing finished goods and evaluating re-routing shipments to the West Coast.

"If the strike lingers, it will be difficult for retailers to form a plan B without fear of being stuck with excess inventory once the strike ends," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

"Depending on how long the strike lasts, many retailers and auto lots may reduce holiday sales events because they won't have enough goods available," he added.

Toy makers Mattel and Hasbro have limited exposure as they get most of their supplies from China via the West Coast ports, especially Los Angeles, said Linda Bolton Weiser of D.A. Davidson.

Walmart, the world's largest retailer by sales, has said it was prepared for unforeseen disruptions in its supply chain and has maintained additional sources of supply to ensure it has key products available.

Fearing shortages, some consumers have been buying extra paper products such as toilet paper, paper towels, pasta and frozen dinners, according to some local retailers. Most paper products are manufactured domestically, however. 

Upmarket grocery chain Gristedes witnessed some panic buying of toilet paper and water bottles at some of its Manhattan stores since the strike began. CEO John Catsimatidis said it was now ensuring that these products are well stocked.

"We're already noticing that water sales doubled yesterday, pasta sales doubled, frozen steaks doubled, frozen dinners doubled," Stew Leonard Jr., the chief executive of New York grocery chain Stew Leonard's, said on Thursday. "Sales of toilet paper tripled."

Nakia, an associate at Target in Manhattan who declined to give her last name, said that she has noticed shoppers picking up extra paper towels, tissues and canned food. The store shelves were fully stocked.

When consumers expect prices to rise or goods to become scarce they can behave in ways - like panic buying - that causes prices to rise.

"What I am more worried about is how it impacts inflation expectations," said Yelena Shulyatyeva, a senior economist with BNP Paribas in New York. "It is very fresh in the memory – the supply chain disruptions (during the COVID pandemic) and how consumers look at it and how companies try to incorporate it."

Conagra Brands CEO Sean Connolly said he expects the company to be able to manage through any disruptions without any significant impact as it had worked with suppliers in advance.

"A modest strike would not result in significant increases in cost or in-transit times, as we've been pulling forward volumes throughout the summer and we've received our holiday inventory," a Tapestry spokesperson told Reuters.

Home Depot said it was closely assessing the situation, similar to Nike, which also said the strikes were a possible risk. Birkenstock declined to comment while Best Buy, Target and the dollar chains did not immediately respond to requests for comment.

"It doesn't look like things are promising at the East Coast (ports)... We are planning for the worst," Gristedes' Catsimatidis said.  

(Reporting by Savyata Mishra and Jessica DiNapoli; Additional reporting by Siddharth Cavale in New York and Juveria Tabassum in Bengaluru; editing by Nick Zieminski and Sandra Maler)