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Inventory Buildups from First Half Could Limit Retailers’ Pre-Holiday Shipping

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West Coast port happenings may no longer be daily news, but retailers are still feeling the effects of the shipping slowdown owed to a labor dispute earlier this year that led to major pileups at America’s busiest gateways.

The big buildups led to higher inventories in the first half of the year, and with retailers still working to clear some of those goods, shipping in advance of the holidays could be limited.

Ben Hackett, founder of Hackett Associates, which published the monthly Global Port Tracker with the National Retail Federation (NRF), said this summer’s inventory-to-sales ratio has been “stubbornly high” and the cause has been more so the post-slowdown flood of cargo than decreased demand.

The Global Port Tracker said cargo volume at 14 of the nation’s major retail ports (including Los Angeles/Long Beach, Oakland, Tacoma and New York/New Jersey) will be up a slight 1.2% this month over last year. NRF estimates the total number of Twenty-Foot Equivalent units TEUs to be handled at these ports for 2015 will be up 5.4% from last year to 18.2 million TEU.

Economists said greater inventories helped fuel growth in the spring, according to the Wall Street Journal, but possible pullbacks by some retailers could slow output for the remainder of the year.

In its first quarter report for the period ended Aug. 31, Nike said its inventories were up 10 percent over the prior year period to $4.4 billion, due in part to the inventory influx that came once the backlog started clearing at West Coast ports.

Under Armour reported for its second quarter ended June 30, that inventory was up 26 percent to $837 million.

Pier 1 Imports is cutting back inventories it had expanded by roughly 20 percent year-over-year and the home goods retailer is paring down its purchasing to do so.

“We will continue to feel the effects of our elevated inventory levels the remainder of this year,” the Journal reported chief executive Alex Smith as saying. “This is particularly frustrating and we are disappointed about the impact it’s having on our margins and profitability.”

For consumers, though, the holidays are looking bright.

“After supply chain worries earlier this year, inventories are plentiful this fall,” NRF vice president for supply chain and customs policy Jonathan Gold said. “Shoppers should have no worries about finding what they’re looking for as they begin their holiday shopping.”

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