| 6 December 2023, Wednesday |

Bulging warehouses mean lean times for longer for US, European companies

Many US and European corporations are experiencing lean times as they struggle to sell off their huge inventory in an economic climate where demand is slowing.

Overcrowded warehouses result in fewer orders for manufacturers, resulting in lower levels of commercial activity and, eventually, slower growth.

As COVID-19 lockdowns clogged supply lines and stopped facilities, shops, distributors, and manufacturers stockpiled everything from alcohol to DIY tools, chemicals, and clothing.

They stocked up again after Russia’s invasion of Ukraine pushed up the price of raw materials such as energy and wheat.

Now, global demand is falling as borrowing costs have risen, so companies have started running down stocks. But the process has been much slower than expected and may drag into next year.

Maersk CEO Vincent Clerc said the company, one of the world’s biggest container shippers, was caught off-guard by how long it was taking businesses to cut inventory.

“We had expected customers to draw down inventories around the middle of the year, but so far we see no signs of that happening. It may happen at the beginning of next year,” he said at a recent media briefing.

Maersk controls about one-sixth of global container trade, transporting goods for a host of major retailers and consumer goods companies.

A review of corporate statements and briefings shows more than 30 U.S. and European companies, including Hugo Boss (BOSSn.DE)Heineken (HEIO.AS) and A.P. Moller-Maersk (MAERSKb.CO), 3M Co (MMM.N) and Stanley Black & Decker (SWK.N) complained that destocking hurt their second-quarter performance.

Retailers particularly have struggled with stocks of clothing and footwear as consumers splurge on holidays rather than goods as they did during pandemic lockdowns.

The downbeat outlook comes amid low expectations for second-quarter results as China’s post-pandemic recovery slows. Refinitiv I/B/E/S data shows U.S. and European companies are expected to report their worst quarterly results in years.

  • Reuters