Rent-to-own News - Wary retailers put holiday shipping boost in doubt

The struggling U.S. economy is beginning to take its toll on shipping companies which should be seeing a big boost from their peak season but instead find retailers delaying decisions about how much to import, according to the Chicago Tribune.

Retailers that had to discount sharply in 2008 because they had too much product on their shelves when the economy tanked are delaying orders for the holiday season as a series of weak economic reports and a plunging stock market ignite fears of a double-dip recession.

"They may be waiting as long as possible to ship ... They want to make sure the economy is on solid footing and that the consumer is OK," BB&T Capital Markets analyst Kevin Sterling said. "If we get to the middle of September or even the end of September and we don't see anything, that's a red flag."

By the middle to the end of September, you've got to make a decision as a purchasing manager: Do I believe in Santa Claus this year? If you think he's not coming, you're going to ship a lot less, and if you think he is, you'll ship more.

"The delay by retailers in finalizing orders for the all-important holiday season, and even a back-to-school shopping season that has moved more into September in recent years, makes it harder for container vessels to impose peak surcharges on goods coming from China and other parts of Asia. Some carriers also face a compressed-but-intensified peak period."

They are trying to get the freight rates back up. The lack of demand is really hindering them and they aren't being successful with that," said Ben Hackett, founder of Hackett Associates, which tracks trade every month at each of the biggest U.S. seaports for the National Retail Federation. Hackett now expects West Coast imports to be up only about 2.4 percent this year. Last year, they rose 17 percent.

U.S. ports followed by Global Port Tracker handled 5 percent less freight in June than they did a year earlier. Fears of uncertainty in the world's largest economy are trickling down to the rest of the supply chain, as Standard & Poor's cut the United States's debt rating. and the Federal Reserve said that U.S. economic growth was weaker than it had expected.

"The question for us going forward is what happens to consumer confidence over the next few weeks based on the national discourse," said Todd Peters, vice chairman of logistics company.

In just the past few weeks, U.S. data showed the economy grew at a meager 0.4 percent annual pace in the first quarter and 1.3 percent in the second quarter, while unemployment ticked lower but was still over 9 percent."

The Transpacific Stabilization Agreement, which includes 15 Transpacific Lines, said its members plan to implement peak season surcharges in mid-August, later than normal, Wells Fargo analyst Michael Webber pointed out in a report. Several lines have attempted to implement higher charges without success, he said.

"Ocean shipping from Asia would normally be entering its peak in the summer and that doesn't appear to be happening just yet. So it doesn't look like retailers are building inventories for the holidays right now," United Parcel Service Inc. spokesman Norman Black said on Tuesday.

Jim Young, chief executive of No. 1 U.S. publicly held railroad company Union Pacific, told analysts last month that he expected a compressed but intensified peak season.

"We still expect a peak season, though later and more compressed than last year, when we saw it begin toward the latter part of the second quarter," Union Pacific spokesman Thomas Lange told Reuters on Tuesday.

For U.S. retailers, the back-to-school season is the second-biggest selling period of the year, after the December holiday season. Both have important implications, as consumer spending accounts for about 70 percent of the U.S. economy, which barely grew in the first half of 2011.

"While it is early in the back-to-school season, we have seen softer traffic trends versus the prior year," OfficeMax Inc Chief Executive Ravi Saligram said last week. Retailers still remember the lessons from the last recession."

Shippers are going to wait until the last minute. The last thing they want to do is build a massive inventory position, then have to massively discount during the holiday season," Sterling said.