West Coast Port Gridlock Hits Inventory at Macy’s and Home Depot

By HIROKO TABUCHIFEB. 24, 2015

The Port of Oakland early this month in California. Port operators and dockworkers reached a tentative deal last week to end a dispute that caused extensive delays in ship traffic. CreditJustin Sullivan/Getty Images

Macy’s and Home Depot said on Tuesday that they were still trying to untangle gridlocked shipments at West Coast ports, a logistics nightmare that has affected merchants across the country.

Port operators and dockworkers reached a tentative deal last week to end a dispute that caused extensive delays in ship traffic, and affected retailers, manufacturers, farmers and merchants.

Still, for Home Depot and Macy’s, much of the disruption lies ahead, the retailers said as they reported earnings.

“The West Coast situation has been tough, with 12- to 16-day delays in getting our imports in,” Mark Holifield, Home Depot’s executive vice president for supply chain and product development, said on a call with analysts. “There’s still a fair amount of uncertainty what the new normal will be, once the ports get back to normal.”

Karen M. Hoguet, Macy’s chief financial officer, said that shipment delays were only just starting to hit inventory levels, and that its apparel and accessories departments were the most affected.

About 12 percent of the department store chain’s first-quarter merchandise was delayed, Ms. Hoguet said, which may affect sales, gross margins and expenses in the first few months of the year.

Both Home Depot and Macy’s reported solid earnings for the fourth quarter.

Home Depot, the world’s biggest home improvement chain, said fourth-quarter net income surged 36 percent from a year earlier to $1.38 billion, aided by a recovering housing market. Adjusted earnings per share came to $1.05, outpacing an estimate from analysts tallied by Thomson Reuters of 89 cents a share. In the three months before Feb. 1, sales at stores open for at least a year rose 7.9 percent, the retailer said.

Home Depot also said it would buy back $18 billion in shares. Its shares jumped almost 4 percent in New York to $116.75, a record. The company did warn, however, that it expected sales growth to slow this year to 3.5 to 4.7 percent, as a strong dollar takes a bite out of its overseas earnings.

Macy’s also beat expectations, earning net income of $793 million, and adjusted earnings of $2.44 a share. Sales at stores open at least a year grew 2 percent during the quarter, the retailer said. But it gave a cautious outlook for 2015, saying it expected per-share earnings of $4.70 to $4.80 and comparable sales growth of about 2 percent, below analyst forecasts.

In a note, Richard E. Jaffe, a retail analyst at the investment bank Stifel, said that no retailer was immune to the West Coast delays.

Department store chains like Macy’s were somewhat protected by allowances that enabled them to return some late products to their vendors. More affected, he said, were retailers that make their own products, which could get stuck with delayed, off-season inventory.

On the other hand, discount retailers like T.J. Maxx, Ross Stores and Nordstrom Rack could benefit, Mr. Jaffe said, as traditional retailers cancel late deliveries. Those discount retailers could “capitalize on the plethora of merchandise available in the marketplace at very favorable prices,” he said.

Macy’s has said it may also open a chain of discount stores. Ms. Hoguet said on Tuesday that those stores would most likely resemble T.J. Maxx or Nordstrom Rack, rather than an outlet. Macy’s hoped that new off-price stores would introduce its brand to a new strata of shoppers, without cannibalizing sales at its department stores, she said.