Footwear industry leads in consumer goods supply chain resilience: S&P Global

It was driven by effective inventory management strategies and a surge in demand.

The footwear industry emerged as a standout performer within the consumer goods supply chain sector, according to S&P Global Market Intelligence’s recent analysis.

“Effective inventory management and strengthening demand have contributed to the positive performance in the footwear industry,” the report stated.

Key strategies include reducing product variety, increasing direct-to-consumer sales, and investing in logistics capabilities. 

In 2024, the consumer goods sector remains entangled in supply chain disruptions, although demand dynamics have shifted away from their pandemic-driven dominance. 

The report said conflicting signals from consumer confidence and spending patterns are posing challenges for supply chain decision-makers.

It added corporate commentary during the latest earnings season showed reduced mentions of supply chain issues, indicating decreased concerns. However, inventory levels continue to decline, driven partly by elevated interest rates. 

Despite this, the sector's inventory-to-sales ratio remains above historical levels, highlighting ongoing challenges.

The consumer appliances sector saw weakened sales due to housing market trends, prompting companies to implement cost-cutting measures. Inflation affects producer prices for key components, with minimal relief expected.

The leisure goods sector also faces uncertainties during peak seasons, including challenges with port operations and shipping disruptions.

Moreover, toymakers anticipate typical seasonal patterns and manage inventories accordingly. Amidst a 2023 slump in shipments, toy imports increase in 2024, anticipating strong sales during peak seasons.

The challenges of forecasting seasonal demand were exemplified by Five Below Inc., which revised its revenue forecast downward following a decline in comparable sales, attributed to diminishing interest in older merchandise trends like ‘squishmallows’ toys.

As per the report, US seaborne imports linked to squishmallows products experienced a decline in 2023 but have shown signs of recovery with an uptick in the first quarter of 2024, indicating a potential stabilisation or improvement in demand.

To address inventory management challenges, Five Below has invested in AI-powered tools to enhance control and real-time information utilisation, particularly in combating inventory shrink.

Beyond consumer goods, total US seaborne imports of containerised freight increased by 11% year over year in May, following similar rises of 8% in April and 11% in the first quarter of 2024.

Import growth extends across various sectors, including a 10% rise in consumer discretionary products and a 10% increase in consumer staples, notably household and personal care products, which saw a 36% rise. 

Additionally, industrial imports remained strong, with a 10% increase in capital goods imports, including a 15% rise in electrical components, though industrial machinery shipments slowed to a 1% increase. 

Moreover, Industrial materials, led by a 20% increase in paper and forestry products, rose by 17%.

“The continued growth is somewhat faster than that expected in our trade forecasts, and may reflect a mixture of earlier shipping ahead of projected peak season challenges or firms taking advantage of lower spot shipping rates earlier in the year,” the report said.