The lack of fries has caused some blowback in Venezuela, where President Nicolas Maduro retweeted a story about a McDonald’s customer in Japan finding a tooth in their food.
The Associated Press reports that an Argentina-based spokeswoman for the franchisee that runs the restaurants, Arcos Dorados, blamed the shortage on a slowdown at West Coast ports in the United States.
While experts told AP that other factors likely contributed to Venezuela’s french fry shortage, including its currency controls and generally challenging economic climate, the report brings to the foreground an issue thats been simmering for months and giving the retail industry a headache during its most important quarter of the year.
Lululemon said in December that it was slashing its fourth-quarter revenue guidance by $10 million because of the port problems. Chico’s FAS, the company behind women’s clothing chains Chico’s and White House Black Market, has said it estimates its total sales in the most recent quarter were 1 percent lower because of the port situation. Ann Taylor said its inventory levels on key merchandise such as pants were affected.
So what exactly is going on?
For starters, the ports have been experiencing greater congestion, with some ships waiting in the water for days to dock and have their cargo unloaded. A labor dispute might also be playing a role in the slowdown. Leaders of the Pacific Maritime Association, which represents employers of several major West Coast port terminals, have been working since May to negotiate a new contract with the International Longshore and Warehouse Union. As the negotiations have stalled, the union has reportedly refused to dispatch some of its workers at the busy Los Angeles and Long Beach, Calif., ports. Workers in Oakland, Calif., walked off their jobs.
Because of the slowdown, many retailers had to come up with a Plan B for getting their merchandise into stores for the crucial holiday season. Chains such as Dollar General and Express rerouted their shipments through East Coast ports. Others, such as New York & Co., turned to air freight to get their items in place. These alternative shipping tactics, especially air freight, may be ratcheting up some companies’ costs and could hurt their bottom line in the fourth quarter.
“The slowdown in the West Coast ports has been a much bigger deal than people think,” Fred Smith, the chief executive of FedEx, said during the shipping giant’s December earnings call.
Smith said he believed that many retailers were probably going to have to deal with “a lot of not-in-stocks” during the holiday, a situation that could disappoint customers and cost the retailers sales.
“I suspect you’re going to hear a lot more about it in January, when the retailers start putting their results out,” Smith said.