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Tags: FedEx | Delta | Shipments | Signal | Holiday | Sales | Pickup

FedEx, Delta Shipments Signal Holiday Sales Pickup

Wednesday, 29 September 2010 10:36 AM

A pickup in shipments to U.S. stores by FedEx Corp. and Delta Air Lines Inc. signals a brighter holiday sales season for retailers.

Delta, which handles more air freight than any other U.S. airline, will have a “perfectly decent” holiday season, Neel Shah, cargo unit vice president, said in a Sept. 8 interview. Shipments are “solid” at FedEx, the world’s second-largest package-shipping company, Chief Executive Officer Fred Smith said on a Sept. 16 conference call.

“It’s a lot better than last year, our orders are way ahead,” Bruce Rockowitz, president of Hong Kong-based Li & Fung Ltd., said in an interview on Sept. 17 in New York. The company is the biggest supplier of clothes and toys to U.S. retailers such as Wal-Mart Stores Inc. and Target Corp.

Shipments are being fueled by retail inventories that are close to record lows at the current sales pace, meaning stores must replenish shelves ahead of the biggest shopping period of the year. While the recession ended in June 2009, the loss of more than 8 million jobs has prompted retailers to discount merchandise to attract customers.

‘Better Place’

“We expect a very, very competitive and aggressive Christmas and holiday selling season, price-focused,” William Simon, head of Wal-Mart’s U.S. stores, said at an analyst presentation on Sept. 15. “Customers are focused on their savings,” and “challenged” by unemployment close to a 26-year high, he said.

While “nobody knows what the consumer’s going to do,” retailers, with leaner inventories this year, “are in a better place,” Li & Fung’s Rockowitz said.

Toys ‘R’ Us Inc., the world’s biggest toy retailer, today said it plans to hire about 45,000 employees to cope with holiday demand, about 10,000 more people than in the prior year. The move is “essentially doubling” the domestic workforce, the Wayne, New Jersey-based company said in a statement.

Jon Langenfeld, transportation analyst at Milwaukee-based Robert W. Baird & Co. Inc., said Asian deliveries herald increased U.S. activity as goods make their way from planes and ships to trucks. Baird’s Asian Port Index climbed 16.2 percent in August from a year ago, and its Asian Airfreight Index was up about 23 percent. The Baird U.S. Truck Freight Index rose 4.7 percent, while it was down 9.4 percent in August 2009.

Constrained by Jobless

Retailers’ holiday sales from November through January will rise 2 percent from a year earlier, according to Deloitte LLP’s retail group, following a 1 percent gain in 2009. A year ago, Americans had no plans to boost spending, which accounts for about 70 percent of the economy, after retrenching during the worst recession since the 1930s, a Bloomberg News survey showed at the time.

“Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit,” Federal Reserve policy makers said in a statement on Sept. 21. They kept the benchmark interest rate near a record low and said they’re willing to ease monetary policy further to spur growth.

With consumers waiting later and later to make purchases, retailers may step up the last-minute deals, said Walter Todd, who helps manage $850 million at Greenwood Capital Inc. in Greenwood, South Carolina.

Last-Minute Deals

“Shippers are going to get paid regardless of whether the merchandise at retailers sells,” said Todd, whose holdings include shares of Wal-Mart, Target and United Parcel Service Inc. “If the stock market continues to do well, and once the elections are over, consumers may begin to feel better, and that could give a boost to holiday sales.”

That indicates “upside” to the share price of companies ranging from Target, the second-biggest U.S. discount retailer, to luxury chains Tiffany & Co. and Coach Inc., “where there’s risk but potentially more reward,” he said.

Target shares have gained more than 11 percent this year. Coach shares have gained almost 17 percent, while Tiffany has increased about 6 percent. Target fell 53 cents to $53.86 at 9:45 a.m. New York time, while shares of Tiffany fell 14 cents to $45.72 and Coach gained 8 cents to $42.65.

Stores are restocking as their inventory-to-sales ratio fell to 1.33 in March and April, the lowest since comparable records began in 1992. The latest data show chains in July had enough goods on hand to meet 1.38 months’ worth of sales at the current pace.

Shares This Year

The ratio “is way too low,” Gene Huang, FedEx’s chief economist, said in a Sept. 21 interview. “Even if you have stabilized consumption demand, you need restocking. So that will give you confidence that this holiday season should be pretty good.”

Richfield, Minnesota-based Best Buy Co.’s stockpiles are up 6 percent from a year earlier.

The inventory “puts us in great position for the holidays,” Brian Dunn, chief executive officer of Best Buy, the world’s largest consumer-electronics retailer, said in a Sept. 14 interview.

Success at ordering enough of the key products, without having too much left over to discount, will determine the season’s winners and losers. Best Buy is expanding offerings of Apple Inc.’s iPad to all its U.S. locations and devoting more space to the so-called tablets category.

Toys ‘R’ Us will operate 600 mall-based temporary stores for the holidays. It had 90 so-called pop-up stores last year. The retailer expects video games to rebound with the release of Microsoft Corp.’s Kinect and Sony Corp.’s Move, both competitors of Nintendo Co.’s Wii.

Closely held Toys R Us is building more inventories than last year, and expects “a great holiday,” Chief Executive Officer Gerald Storch told reporters on Sept. 15 in New York.

© Copyright 2022 Bloomberg News. All rights reserved.

A pickup in shipments to U.S. stores by FedEx Corp. and Delta Air Lines Inc. signals a brighter holiday sales season for retailers. Delta, which handles more air freight than any other U.S. airline, will have a perfectly decent holiday season, Neel Shah, cargo unit vice...
Wednesday, 29 September 2010 10:36 AM
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