Truckers expect softer holiday shipping on waning retailer demand

Freight businesses are bracing for what executives are calling a muted peak season as lower shipping demand from overstocked retailers trickles down to U.S. shipping markets.

Several major operators say they see freight demand falling rather than picking up as they approach what is usually their busiest time of the year. The slowdown in activity is driving down rates in the volatile trucking spot market and the weakness is starting to trickle down to contract business which accounts for the largest share of trucking volumes.

“The fourth quarter is usually the peak of the holiday season,” said David Yeager, chief executive of Hub Group. Inc.,

a Chicago-based provider of trucking and rail freight services, said on an earnings conference call Thursday.

“However, judging by our customer feedback, this peak will be muted compared to historical standards. Beyond 2022, we recognize the potential for a continued downturn in the economy,” he said.

“We expect a muted peak season this year,” Adam Miller, CFO of Knight-Swift Transportation Holdings Inc.,

said during the truck carrier’s Oct. 19 earnings call. “Spot opportunities have diminished significantly and we have looked to making additional commitments throughout the bidding season to reduce our exposure to the spot market.”

Freight operators, amid the release of third quarter results, are the latest in a host of companies in the transport sectors to warn of a slowdown in demand as inflation reduces purchasing power consumers and triggers uncertainty about the direction of the economy.

Amazon.co.uk Inc.

On Thursday, forecast sales for the current quarter would be well below expectations. United Parcel Service Inc.

said its volumes fell in the third quarter and the parcel giant expects volumes to fall during the next peak period for the parcels industry.

Weakening demand extends to trucking markets after ocean import volumes began to decline over the summer as inventory began to pile up at major retailers, including Target Corp.

and Walmart Inc. Merchants were rushing to their warehouses and stores earlier this year to avoid the kind of supply chain disruptions that reduced sales in the fourth quarter of last year.

Clothing retailer Ministry of Supply Inc. stocked its peak season inventory with orders that arrived too late for last year’s winter season and items that arrived early this year.

“We were kind of having two winters of things, like August,” said Aman Advani, co-founder and CEO of the Boston-based company. “Our fall-winter line, a lot of pieces arrived two months in advance. Our fall-winter line last year, many pieces arrived six months late.

So far, many cargo carriers have reported strong third quarter results, even as they report a weaker economy in the fourth quarter.

Former Dominion Freight Line Inc.,

a Thomasville, North Carolina-based operator focused on the LTL market, in which shipments from multiple customers are combined on the same truck, announced Wednesday that its net profit rose 32% year-on-year the other to reach $377.4 million.

ODFL revenue rose nearly 15% to $1.6 billion, largely because its revenue per hundredweight, an industry measure signaling price strength, rose 17.4% . But tonnage fell during the quarter and continued to fall in October, the carrier said.

“We believe this drop in LTL tons reflects the overall weakness in the domestic economy which has generally caused lower demand for our customers’ products,” ODFL Chief Financial Officer Adam Satterfield said during a briefing. conference call on Wednesday.

The weakness is most evident in the spot freight markets.

DAT Solutions LLC, a load chart that matches trucks with available loads, said its spot market demand index fell sharply from August to September, to the lowest point since February. The company’s measure of the average pickup truck spot price fell from August to September for the first time since 2015.

“Things are definitely softening,” said Avery Vise, vice president of freight research firm FTR Transportation Intelligence. “A lot of this is because we’ve seen inventory build up earlier in the year than we’ve traditionally seen due to all the supply chain disruptions and the desire of many retailers to get ahead.”

“If you’re a carrier exposed to the spot market, you suffer.”


—Jeffrey Tucker, Managing Director of Tucker Company Worldwide

Cargo executives say demand remains solid relative to historic measures, suggesting shipping markets are reaching some balance after sharp swings in business during the pandemic.

“Rates are still up this year over last year,” said Jeffrey Tucker, general manager of Tucker Company Worldwide Inc., a Haddonfield, NJ-based freight broker. “If you are a carrier exposed to the spot market, you suffer. The spot market, the opportunistic activity that is important to smaller carriers and many freight brokers, has dried up a bit.

Still, trucking executives say they expect retailers to start shipping higher volumes again once they clear excess inventory, though that won’t happen until early 2023.

“It’s just a matter of the demand that we don’t think exists for our customers’ products, if you will,” said ODFL’s Mr Satterfield. “We’re just not picking up as much freight from those same customers as we could make stops at their homes every day.”

“At some point,” he said, “people have to pull inventory into the system.”

Write to Liz Young at liz.young@wsj.com and Paul Page at paul.page@wsj.com

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