ConAgra and Lululemon said they expect shipment delays for several more months as a result of West Coast port congestion.
Packaged food company ConAgra Foods and apparel maker Lululemon Athletica on Thursday were the latest North American companies to comment on the financial impact of the West Coast port congestion.
ConAgra said international sales and profits for its Commercial Food segment were weak in the third quarter ended Feb. 28, partly because of the slowdown in shipments when a labor dispute at the ports severely cut productivity. Many exporters were faced with shipments stuck in ports or held in warehouses for several weeks, instead of days, because workers allegedly dragged their feet and terminals subsequently cut back operating hours.
ConAgra said it expects slower than normal shipments through the end of May due to the backlog created by the labor situation.
Lululemon executives said they are feeling the ripple effects of the West Coast port congestion more in the current quarter, which began Feb. 1, than in the fourth quarter.
The delays proved not to be material in the fourth quarter, but “we are now seeing a more meaningful impact,” Lululemon CEO Laurent Potdevin said, according to a transcript of the company’s earnings call with analysts.
Lululemon, Vancouver, British Columbia, increased net revenue in the fourth quarter 16 percent to $602.5 million, but gross profit as a percentage of net revenue dipped 200 basis points to 51.5 percent.
Thirty basis points, or 0.3 percent, of the dip in gross profit compared to the fourth quarter of 2013 was due to higher airfreight costs to expedite shipments to stores, Chief Financial Officer Stuart Haselden said.
The company now estimates that $10 million in sales are at risk in the current quarter and that delays are expected to extend into early second quarter, he said.
The International Longshore and Warehouse Union and the Pacific Maritime Association reached a tentative deal on Feb. 20 for a new multi-year contract. Port operations in Los Angeles and Long Beach, Oakland, Seattle and Tacoma are slowly normalizing, but lingering delays are expected for at least another month or two at the crowded Southern California portd. And work rates in Los Angeles and Long Beach will still only return to the pre-dispute congestion levels because Los Angeles and Long Beach continue to struggle with operational challenges associated with big ships
In other developments, Lululemon opened a third distribution center in Columbus, Ohio, to extend distribution capacity for Europe and cut in half shipping times for e-commerce customers and stores in the eastern United States.
Port congestion continues to weigh on shippers
