Much of what we buy in retail stores is imported from outside the US. Those goods are typically shipped to one of our nation’s ports. Tracking the activity of those ports gives us a good idea about how optimistic or pessimistic retailers are with import orders. An excellent source for this information is Port Tracker.
Port Tracker is published by the National Retail Federation (NRF) and IHS Global Insight. It looks at inbound container volume, the availability of trucks and railroad cars to move cargo out of the ports, labor conditions and other factors that affect cargo movement and congestion. It provides valuable insight to what retailers are ordering and how much merchandise they plan to stock on their shelves. Access to the full report requires an NRF subscription. Information can be found here.
According to the June 9 Port Tracker report, import cargo volume at the nation’s major retail container ports was weak for April 2009, the most recent data available. US ports surveyed handled 990,632 Twenty-Foot Equivalent Units (TEU). One TEU is one 20-foot container or its equivalent. That was up 2% from March 2009, but down 22% from April 2008. After February 2009 (839,492 TEU) and March 2009 (970,949 TEU), April 2009 was the third-lowest monthly total since Feb 2004 with 901,497 TEU. More importantly, April marked the 22nd month in a row to see a year-over-year decline.
In its release, the NRF noted that “[r]etailers are still being cautious with their inventory levels in anticipation of slow sales this summer and into the fall. The big question is what will happen during the fourth quarter. Our numbers for the fall are an improvement over the summer, but are still lower than last year.”
More like a great deal below last year. Port Tracker estimates that import cargo volumes will continue to experience year-over-year declines in the high teens. If its forecasts turn out to be correct, January-November 2009 volumes will fall 19% from January-November 2008. What’s more, if retail sales continue to hover around current levels through October, there is little chance that consumers will suddenly spring to life for the holidays.
Port Tracker monthly import cargo volumes and estimates through October 2009:
The NRF notes that October is traditionally the peak of the annual shipping cycle as holiday merchandise flows into stores.
Total volume for 2008 was 15.2 million TEU, down 7.9% from 2007. This year is on track to have the lowest import cargo volumes since 14 million TEU in 2004.
We think import cargo volumes are a good indicator of what retail sales are likely to like in the months ahead. Looking at recent monthly trends and Port Tracker’s forecasts, signs point to monthly stabilization at much lower levels than last year.
There is nothing in these figures that suggests a consumer-led recovery is in the cards. As a result, we still think the best way to play retailers is to stay defensive. That includes discounters like Family Dollar (FDO) or Dollar Tree (DLTR), mass merchandisers like Wal-Mart (WMT) and wholesale clubs like Costco (COST).
Read the full analyst report on “FDO”
Read the full analyst report on “DLTR”
Read the full analyst report on “WMT”
Read the full analyst report on “COST”
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