Hot U.S. Economic Growth Is Burning Companies That Can't Keep Up
(Bloomberg) -- A strengthening economy has its downsides. Just ask United Natural Foods Inc.
As suppliers struggle with bottlenecks, the food distribution company said it is having trouble keeping shelves stocked and paying higher transportation costs.
“Higher demand is pressuring our supply chain,” Chief Executive Officer Steven Spinner said on a conference call after reporting results late Wednesday for the fiscal third quarter. “A headwind from inbound freight expense” is likely to continue for at least the next six months.
The hurdles underscore the capacity constraints that are increasingly crimping the U.S. economy’s long expansion. REV Group Inc., which makes buses and ambulances, cited “the availability of chassis” as a reason for weak second-quarter results. Oil producers have reported dwindling pipeline space, and a rail and trucker shortage that’s eating into profit as shipping costs increase.
United Natural Foods fell 13 percent to $40.10 at 2:59 p.m. on the distribution concerns, as well as weak margins, accounting changes and other issues. That was the biggest intraday decline in almost a year. REV Group was poised for a record decline at the close, down 19 percent to $14.49.
Economic growth has raised demand for transportation and led to a shortfall in drivers. Recent estimates from FTR Transportation Intelligence found that the U.S. has about 280,000 fewer truckers than it needs. The Institute for Supply Management cited “stockouts and shortages” in a report this week showing that U.S. service industries expanded in May at a faster pace than forecast.
“It’s a capacity issue as it relates to gearing up for the business demand,” Anthony Nieves, chairman of the ISM non-manufacturing survey committee, said on a conference call.
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