A seasoned Wall Street investor warned on Friday that the supply chain crisis may last until 2023.
During an interview with CNBC, Paul Meeks — who led Merrill Lynch’s technology fund during the dot-com bubble and currently works as a finance professor at The Citadel — told the outlet on Friday that companies’ profitability may be threatened by the bottlenecks.
“Some of these companies actually will not be able to ship units. And if they can’t ship units, they might disappoint on their earnings,” he explained. “Their stocks are so expensive that they could go down. Not go down a bit, they could go down a lot.”
“It’s a bummer and unfortunately, there’s not any relief,” he added. “It’ll also hit the top and bottom lines of some of these vendors that are selling those hot Christmas products.”
Shipping vessels carrying consumer goods from overseas are idling in the Pacific Ocean as the United States faces labor shortages, creating bottlenecks in California ports. As of November 10, a record 111 vessels were waiting to unload merchandise. Retailers across the United States are therefore lacking inventory to meet consumer demand.
Meeks’ analysis matches concerns raised by economists polled by The Wall Street Journal, who believe that the supply chain crisis is the top issue facing the American economy.
“Concerns about limited supply are the main cloud over the outlook. Around half of respondents cited supply-chain bottlenecks as the biggest threat to growth in the next 12 to 18 months, while nearly one-fifth pointed to labor shortages,” says the outlet. “They also expect supply-chain woes to weigh on the economy through much of next year. Some 45% estimate that it will take until the second half of 2022 for bottlenecks to have mostly receded, compared with two-fifths expecting major improvement before then.”
As referenced by the respondents and by Meeks, the supply chain crisis is prompting firms to change their behavior.
Some companies — such as Hershey and Kimberly-Clark — are slashing their advertising budgets as they struggle to fulfill pending orders.
“Our earnings were negatively impacted by significant inflation and supply chain disruptions that increased our costs beyond what we anticipated,” said Kimberly-Clark chief executive Mike Hsu. “We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly.”
Coca-Cola is now anticipating product shortages through 2022. During an interview, Coca-Cola chief executive James Quincey said that “some issues are ongoing and structural, and some issues appear for a quarter and disappear again.”
“My analogy would be it’s a bit like an earthquake,” he added. “You get further shock waves coming through, but they tend to be of diminishing magnitude.”
Goya CEO Bob Unanue pointed to supply chain issues as a cause for the company’s price hikes.
“We bring products like coconut water from Thailand [and] from Vietnam and a container with about 1300 cases of coconut water in it used to cost about $1800, $1.40 a case; it’s gone up to $20,000 to get on a container ship if you can,” he explained.