A day after blue-chip retail names Walmart and Target spooked investors with commentary about rising inventories in the faces of changing consumer spending patterns, the CFO of Schneider National Inc. said “it’s easy to get caught up in the big news of the moment” and sought to place recent developments in broader perspective.
“There’s likely to be some unevenness in both the economic patterns and in the freight patterns” as the economy continues to normalize after the shock of COVID-19, Steve Bruffett said during a May 19 appearance at the 29th annual Transportation, Airlines and Industrials Conference hosted by Bank of America Securities. “That doesn’t necessarily mean that everything’s going to come grinding to a halt, either … . There may be some bumps in that road but I think, overall, the freight environment will remain constructive.”
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Executives at Walmart this week reported fiscal first-quarter earnings that missed expectations and lowered their 2022 outlook for profits. The key culprits, they said, were sharp rises in fuel and labor costs as well as rising inventory levels and a shift in spending that more strongly emphasized low-margin items. The leaders of Target reported a similar dynamic along with their Q1 numbers, which led investors to take chunks out of both companies' shares as well as many of their peers and a lot of stocks in the transportation sector.
Bruffett, who has been in his role at the No. 11 carrier on the FleetOwner 500: For-Hire list since 2018 and before that was CFO of Con-way Inc. and the former YRC Worldwide Inc., said the market hasn’t appreciably changed since Schneider reported its first-quarter earnings three weeks ago. The Schneider team, he added, is seeing continued strong demand in several other parts of the retail sector, including at DIY stores affected earlier this year by a late wave of winter weather. The Target and Walmart news items, he said, are akin to air pockets on a flight.
“I don’t find it overly surprising that there would be some slack in the rope at some point in time, given the path traveled over the past numerous quarters where the rope has been stretched super tight,” Bruffett said. “There probably, for some companies, will be a bit of excess that they need to work through.”
During his time at the BofA event, Bruffett also said Schneider is having a “very constructive” renewal season and been able to pass along increases in its cost of fuel and drivers. That dynamic, he added, should continue through the rest of the year.
Investors appeared to take some heart in Bruffett’s comments: On a slightly-down day for the overall market and many trucking peers, shares of Schneider (Ticker: SNDR) rose slightly to $22.13. On May 18, they gave up nearly 10%; they are now off about 15% so far this year.
