Supply chain snags are hobbling American and European businesses as rising shipping costs threaten their ability to meet surging demand heading into the peak shopping season. 

(Bloomberg)—Bed Bath & Beyond Inc., No. 26 in the 2021 Digital Commerce 360 Top 1000, reported a slowdown in store traffic and unrelenting supply chain challenges, which led the home-goods company to cut its forecast, an ominous sign for the retail industry ahead of the all-important holiday shopping season.

Revenue in the quarter ended Aug. 28 fell 26% from a year earlier to $1.99 billion, short of the $2.06 billion estimate from analysts compiled by Bloomberg. Same-store sales, a closely watched retail metric, dropped 1%, while Wall Street had projected a gain of 1.8%. For the company’s self-titled stores, same-store sales declined 4%.

Its online sales “delivered a significant sales increase above 2019 at nearly double the proportion of sales,” said CEO Mark Tritton on an earnings call transcribed by Seeking Alpha.

Its total net sales were $1.99 billion and its digital channel represented 34% of total net sales, chief financial officer Gustavo Arnal said on the call. “We’re pleased to see that our digital base continues to be a meaningful portion of our results with double the penetration versus pre-pandemic level,” he said.

Bed Bath & Beyond said that store traffic slowed significantly in August amid renewed COVID-19 concerns—especially in large states such as Texas, Florida and California, which make up about a third of volume for the retailer. “Therefore, sales did not materialize as we had anticipated,” Tritton said in a statement.

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The company’s results also heighten concern about supply-chain challenges that have plagued Corporate America this year as rising costs, a lack of workers and freight difficulties run up against persistently high demand.

“Things just rapidly accelerated in terms of costs by month,” Tritton said in an interview, adding the company is having trouble getting orders completed and on shelves, with delivery delays in the range of 30 to 45 days.

“This is happening now and I think it’s going to go right through the fourth quarter, end of that first half,” he said, referring to the fiscal period that would run through next summer. “We’re building contingency plans to accommodate all those issues.”

He projected the holiday shopping season being stronger than the quarter that just passed. For now, however, store traffic remains low.

“The challenges we faced in August have not abated in September,” Tritton said during the company’s call with analysts. The company’s focus is now on reaching a recovery by November, which historically has represented nearly half of the company’s sales during the third quarter.

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He said the delta variant has altered consumer behavior, with data showing that U.S. shoppers have grown more cautious about shopping in stores. Gains are also moderating in the market for home-goods, which was turbocharged by pandemic restrictions that caused consumers to funnel cash toward sprucing up their living spaces.

“It’s just confusing times for people,” Tritton said.

Bed Bath & Beyond now expects sales for fiscal 2021 to be in a range of $8.1 billion to $8.3 billion — a reduction from the outlook it published in late June, when it projected revenue as high as $8.4 billion.

Tritton added that the company’s turnaround plans remain on track. The retailer has revamped its operations since he was hired from Target Corp. in late 2019 — it now offers more of its own brands and has opened new distribution centers.

H&M, Boohoo face holiday crunch

Supply chain snags are hobbling European businesses as rising shipping costs, a growing energy crisis and acute trucker shortages in Britain threaten their ability to meet surging demand heading into the peak shopping season.

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Less than three months before Christmas, online retailer Boohoo Group Plc lowered its forecasts for sales and profitability, while Hennes & Mauritz AB reported slowing revenue growth. Both blamed delays in deliveries and the higher cost of moving goods. Boohoo shares plunged as much as 17%.

The challenges facing the U.K. fast-fashion retailer and its rivals reflect the difficulties dogging many European businesses more than 18 months after the coronavirus pandemic took hold. Next Plc, one of Britain’s largest clothing and home retailers, warned earlier this week that consumers may have to wait longer to receive goods this holiday season and could face price inflation next year.

“Whenever you move goods at the moment, it’s just much more expensive,” Boohoo Chief Executive Officer John Lyttle said in a phone interview. The company’s 26 million pounds ($35 million) of shipping costs in the first half — higher than pre-pandemic levels — dented its profit outlook, he added.

The squeeze on deliveries has worsened recently as Europe’s economies rebounded following the end of lockdowns, while shipping and air freight capacity remained tight and costly. Logistics is particularly snarled in the U.K., where a severe shortage of truckers is making it harder for businesses to transport goods and keep shelves stocked.

This scarcity of drivers exploded into a national crisis last week when fuel supplies were disrupted and a run on gas stations led to many outlets running dry. Britain has since deployed the government’s reserve tanker fleet to deliver fuel and stabilize the situation. Add in soaring electricity prices across Europe, rising labor costs, and a pandemic which is far from tamed and businesses look set to face a difficult end to the year.

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“We can’t meet 100% of the demand from our customers,” Helena Helmersson, CEO of H&M, said on a call. The disruption will “stay with us for a bit,” she added.

At H&M, sales gained slightly in September, slowing from 14% growth in the third quarter. The shares fell 1.3% in Stockholm. The Swedish clothing seller sources the bulk of its clothes from Asia, where bottlenecks are delaying shipments.

Boohoo, whose revenue hit a record in the first half, blamed the cut in its forecasts on shipping snags and wage inflation. It now takes eight to 10 days, rather than five, for the retailer to ship goods to customers in the U.S., affecting demand, said Lyttle.

Simon Wolfson, the CEO of Next, said the post-lockdown bounce in demand it experienced as shoppers returned to stores will “inevitably diminish as time goes on.” Even so, the mainstay of British malls raised its profit forecast for the fourth time.

Boohoo’s Lyttle predicted supply-chain costs will cool off, particularly starting in November when more air travel to the U.S. resumes, boosting air-freight capacity. Wolfson, too, indicated such costs are likely to ease heading into 2022, but he also called on the U.K. government to relax some post-Brexit immigration rules to let more overseas workers into the country to ease the labor shortage.

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“For the sake of the wider U.K. economy, we hope that the government will take a more decisive approach to the looming skills crisis in warehouses, restaurants, hotels, care homes and many seasonal industries,” he said on a call Wednesday.

H&M is No. 10 in the Digital Commerce 360 Europe 500. Boohoo is No. 31.

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