Port strike could bring biggest impact to these retailers, says Truist

By James Rogers

An extended strike could mean higher logistical and supply-chain costs - as well as potential product shortages - for some big names in retail, according to Truist

The strike affecting U.S. East Coast and Gulf ports could weigh on a number of major retailers, Truist Securities said, despite the companies' efforts to prepare for fallout from the port shutdown.

The strike began at midnight after the expiration of a contract between the International Longshoremen's Association and the United States Maritime Alliance.

In a note released Monday, Truist analyst Scot Ciccarelli explained that many retailers have moved up their import timelines, especially for holiday items, and rerouted shipments to West Coast ports. Nonetheless, a shutdown would likely add costs and potentially result in product shortages, and therefore sales shortages for many retailers, according to the analyst.

Related: Ports strike could have $4 billion daily impact, but these container stocks are well positioned

"While even a brief shutdown would likely have negative impacts given the sheer volume of goods that come through these ports, our recent conversations with our companies suggest that they already have contingency plans in place, so the nearterm headwinds would likely be minimal," Ciccarelli wrote. "That said, if the strike goes on for an extended period and the delays/backups compound, it's likely that companies will begin to face higher logistical and supply chain costs (higher container rates, increased ground transport costs as stem miles increase, etc.) as well as potential product shortages."

"In that scenario, we would expect many of our companies to face both cost, and potentially sales headwinds, until the strike is resolved and container backlogs are worked through," the analyst added. In Truist's view, the heaviest negative impacts would likely be on Dollar Tree Inc. (DLTR), Five Below Inc. (FIVE), Target Corp. (TGT), Best Buy Co. Inc. (BBY) and Walmart Inc. (WMT). However, Ciccarelli notes that the strike would likely be "a headwind of some level," across the board.

Dollar Tree shares are up 0.7% in premarket trades, while Five Below shares are up 1.9%. Target's stock is down 0.1% and Best Buy shares are flat. Walmart shares are down 0.3%.

Related: A port strike would be ill-timed, but disruption could boost these companies

However, Ciccarelli said that if the strike results in "meaningful" supply chain disruptions, it could give further momentum to onshoring and nearshoring of production activity. This could potentially provide another long-term tailwind for auto-parts maker Genuine Parts Co. (GPC), according to the analyst.

Genuine Parts shares were flat premarket.

The strike could affect the U.S. economy by as much as $3 to $4 billion a day, according to Jefferies, while J.P. Morgan estimated that the ports shutdown could have an economic impact of $3.8 billion to $4.5 billion per day. However, some of that would be recovered over time after a return to normal operations, according to J.P. Morgan.

Related: A port strike could be an economic 'tsunami' affecting these sectors

"The economic impact is a tsunami when we potentially have half of the country's ports closing down," Margaret Kidd, associate professor of supply chain and logistics at the University of Houston, told MarketWatch last week.

-James Rogers

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10-01-24 0926ET

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