West Coast port workers are back on the job with a new five-year contract, but after months of work slowdowns and stoppages, it will likely take another two months to catch up on the backlog of shipping containers, analysts say.
The outdoor industry won’t be immune to the delays.
Like many U.S. companies manufacturing their goods in Asia, outdoor brands rely on a steady stream of traffic from Asia to make their product deliveries to retailers and consumers. And with many brands fine-tuning their schedules more than a year out, the system is now out of whack.
“I don’t think many people are aware that this issue really started last summer,” said Philip Benson, general manager for Zamberlan USA and president for Selk’bag USA, two international brands that rely on the West Coast ports to get their products to the United States.
The first shipment of Zamberlan’s new boots with Gore-Tex Surround technology was supposed to arrive in late September 2014, in time for the all-important holiday season, Benson said. Instead, the footwear arrived at the company’s Seattle warehouse last week on Feb. 20, 2015.
“We estimate about $150,000 to $175,000 in lost or delayed sales,” Benson said. “For a family-owned company like Zamberlan that’s a hit … there’s now increased capital tied up in inventory affecting the cash cycle for next year. There’s a ripple effect.”
Despite the frustrations, outdoor retailers have been accommodative and understanding, Benson said. A majority of their vendors are dealing with the same issues. Yet some brands may see an upside if they were able to work around the hurdles and make some deliveries.
Some brands adjusted schedules to ship earlier, or chose different routes. Gulf and East Coast ports saw increased traffic, although combined with rough winter weather on that side of the country, there were delays there, too.
“I think it also presents some opportunities for domestic manufacturers,” Benson said. “There’s a short-term opportunity for those brands to fill in the gaps and if they execute well, it might turn into a long-term benefit.”
The delays plus new contract — that will presumingly increase pay for dock workers — will likely increase shipping costs for brands in the future, but Benson doesn’t think it will hit the U.S. consumer with higher prices just yet. “This all comes at time when the U.S. dollar is doing really well against most foreign currencies,” he said. That’s a savings for U.S. brands manufacturing overseas, he said, and likely one they’ll use to cover the extra costs, for now.
Heard on Wall Street
Some of the outdoor industry’s largest outdoor brands, including the North Face, Columbia and Marmot faced investor questions about the West Coast port delays during their first-quarter conference calls last week (before the settlement was announced). Here’s what they said:
James Lillie, CEO, Jarden Corp. (NYSE: JAH), parent to Marmot, K2, Marker and Coleman.
“It's going to impact everybody. It's going to impact retailers who are importing their own products. It's going to impact our competition. And so it's a fairly level playing field, but I think what Jarden has as a benefit is our scale and our influence with those container ship companies and the truckers and the rail yards, etc. And so I'd much rather be someone who has a diversified scale than a smaller company with one or two different product lines, because I think we'll be able to handle it.”
Tim Boyle, CEO, Columbia Sportswear (Nasdaq:COLM), parent to Columbia, Mountain Hardwear, Prana and Soerel
“One additional variable that's difficult to predict or to factor into our 2015 outlook is the ongoing situation at West Coast ports. Some of these ports have been experiencing disruptions for well over a year. We have been proactive in taking steps to mitigate the disruptions and continue to work closely with our transportation partners and with our customers to expedite, reroute and prioritize as necessary to maintain an adequate flow of goods. Our outlook assumes that macro and market conditions in key markets and the U.S. West Coast port issues do not worsen. We remain confident in our strategies to drive continued growth by focusing on those things that we can control.”
Eric Wiseman, CEO, VF Corp. (NYSE:VFC), parent to The North Face, Timberland, Vans and Eagle Creek
“The West Coast port situation really began last summer. Our team has been navigating through that incredibly effectively. Have we had some misdeliveries? Yes. Have we had some incremental costs? Yes, but nothing that we need to call out anybody's attention. We have diverted stuff to other ports. We've moved part of our truck fleet out there to get our products through the docks and off the platforms. But it is a complicated situation. If it does go to a full on strike and shutdown it will be material to everybody. If it’s one weekend, we'll get through it. If it's three months, it would be really important. If our orders are late getting to customers, customers don’t have to take them, so that’s we bear the risk, but I would tell we've had that risk now for eight months and we have managed it really well.”