Early signs are pointing to a merry Christmas for Canadian retailers – but Santa could be late making some deliveries.
Backlogs at American ports along the West Coast, which have been ongoing throughout the fall, are starting to affect holiday sales projections for some Canadian companies.
In the company’s third-quarter conference call, Lululemon Athletica (Nasdaq:LULU) CEO Laurent Potdevin warned that the lower Canadian dollar, delayed store openings and shipping delays could cost the yoga-wear maker $15 million in the fourth quarter.
CFO John Currie said that port disruptions in the U.S. will affect Lululemon’s Canadian sales. “A lot of the ships that come from Asia might stop in L.A., then Seattle and then make their way up to Vancouver where we unload for Canadian shipments,” he said.
Small and large retailers across North America that order items from Asia are all being affected by the slowdown, say retail industry observers. Supply problems are also popping up on the other side of the Pacific: the Wall Street Journal recently reported that McDonald’s (NYSE:MCD) in Japan would stop serving large and medium fries because of delays in potato deliveries from the United States.
A perfect storm of factors has made this a “year from hell” for shippers, said Ruth Snowden, executive director of the Canadian International Freight Forwarders Association.
It started with bad winter weather in 2014’s first quarter and continued with a truckers’ strike at Port Metro Vancouver in March that lasted for nearly a month.
Severe storms in the Pacific mid-year threw off shipping schedules, Snowden said. Labour negotiations with the International Longshore and Warehouse Union at the ports of Los Angeles, Long Beach, Seattle and Tacoma have dragged on through 2014. According to media reports, port management has claimed that dockworkers have at times slowed their pace of work to gain leverage.
A brief container trucking strike in November also disrupted port operations in Los Angeles.
In addition, the ports of Los Angeles and Long Beach are struggling with a shortage of container truck chassis. The roots of that problem, Snowden said, lie in a change to liability in case of damage or injury. The upshot is that neither the large shipping companies that used to own the chassis nor the trucking companies themselves want to own them anymore.
“The ships are now all out of schedule and all out of rotation, so their normal rotation is totally trashed right now,” Snowden said. “Vessels are at anchor at these U.S. ports. … they’re sitting there a week, 10 days, two weeks.”
Retail analyst John Williams of the J.C. Williams Group said retailers are already struggling to survive in an ultra-competitive environment and port slowdowns are adding to their troubles.
“This is costing billions of dollars a day,” Williams said.
Small businesses are especially affected by the disruptions and could end up with a big bill for storing stalled inventory, said Greg Wilson, director of government relations for B.C. for the Retail Council of Canada.
“We hear constantly from retailers about problems with American infrastructure,” he said.
But most business owners Wilson has spoken to said they anticipated the disruptions months in advance and did their Christmas ordering early. He’s also been hearing that Christmas sales in Western Canada have been brisk.
Snowden expects the problems to continue into the new year: there is no quick end in sight for the labour and equipment problems, the winter storm season is approaching and Chinese New Year is another crunch time.
“We’re looking at a challenging first quarter as well,” she said.
-With files from Tyler Orton
Port container truckers irked over new trip rate structure
While shippers struggle with delays at American ports, operations have been stable at Port Metro Vancouver terminals after container truckers staged a month-long strike in March 2014. But Vancouver-area truckers are again voicing their displeasure, saying that new rates proposed by the B.C. government will allow trucking companies to choose between paying their drivers by the hour or by the trip.
“For the hourly drivers who are supposed to be earning $26.28 an hour, that’s about $210 a day. This new trip rate they’ve come out with is $40 a trip with a minimum of $160,” said Gavin McGarrigle, B.C. area director for Unifor, the union representing some of the port container truckers.
“If you’re a trucking company owner and you have a company driver that moves four containers a day for eight hours, are you going to pay them $210 or are you going to pay them $160? So that’s $50 a day they could be losing.”
The Ministry of Transportation says the rate structure was “informed by” recommendations from labour mediator Vince Ready and that extensive consultation was done with labour and industry.
McGarrigle said that if changes are not made to the rates, truckers might go on strike again.
“It could be a rocky Christmas,” he said.