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Executives Can’t Stop Talking About Supply Chain and Inflation: Panjiva

Talk over the supply chain and inflation spiked in the fourth quarter as the C-suite remained focused on diversification strategies to boost inventory predictability amid increasing costs.

An analysis released this week by S&P Global Market Intelligence’s supply chain research division Panjiva found executives’ mention of the supply chain and logistics have risen in step with just how often inflation was discussed during the most recent round of earnings calls.

The report found fourth-quarter calls with talk of inflation occurred 71 percent of the time. That compares to 39.2 percent in the year-ago period.

CEOs and CFOs addressing the supply chain and logistics during their fourth-quarter updates increased to 77.8 percent and 61.2 percent, respectively, according to Panjiva. In the fourth quarter of 2019, mentions of the supply chain and logistics were 44.1 percent and 43.4 percent, respectively.

Supply chain and inflation are likely to continue to dominate the public companies’ earnings reports in the coming quarters.

“Things are trending in a way that looks upward as long as inflation remains a topic that concerns the public companies and the government,” Panjiva supply chain analyst Eric Oak said.

Discussion around the two subjects and how they impact predictability of available inventory have come to replace concerns over costs associated with the trade war, which dominated quarterly updates in 2018 and 2019. Mentions of cost pressures from tariffs on China fell to 13.9 percent of fourth-quarter calls, according to the report.

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“The beginning of 2020 was when we started to see those topics of trade war start to decline rapidly,” Oak said. “What we really found is in the current logistics and current supply chain environment, companies are not as concerned with an extra 50 percent cost on their goods.”

These conversations are up in the apparel, textile and leisure products industries. Some 75 percent of earnings calls among apparel and textile firms tackled inflation, which is up 192.5 percent from a year ago. Supply discussions for the same group of companies totaled 87.5 percent of calls in the fourth quarter, compared to 76.9 percent in the year-ago period.

Publicly traded apparel companies are trying to stay on top of the supply chain challenges as they release their forecasts for the year.

“Despite our best efforts to deliver products to our retail partners, wholesale sales were constrained by supply chain disruptions,” Columbia Sportswear Co. chair, president and CEO Tim Boyle told analysts last week.

That said, the CEO pointed out the company’s forecast reflects “ongoing supply chain bottlenecks, which are anticipated to continue.”

Hanesbrands Inc. executives sounded off on a similar sentiment during the company’s fourth-quarter earnings call last week.

CFO Michael Dastugue told analysts disruptions in transportation and logistics have meant more inventory in transit for the company.

“These continued supply constraints are restricting our ability to fully capture all of the consumer demand we are seeing,” Dastugue noted. “Said differently, based on demand, our sales growth outlook would be even higher for both the first quarter and full year absent these supply chain challenges.”

The CFO went on to say the company is optimistic going into the year as it manages through consolidations among suppliers and invests in equipment to reduce raw material waste.

“These investments,” Hanesbrands CEO Stephen Bratspies said during the call in speaking to equipment and the diversified supply chain, “have helped broaden our product and brand assortment with our major retail partners through increased shelf space, particularly with our U.S. innerwear business, and they have allowed us to strategically invest in inventory to capture demand upside and position us to drive future growth.”