Dive Brief:

• Foot Locker's inventory remained leaner than it would like in the most recent quarter, but executives said that the port congestion on the West Coast — which it had previously cited as a cause of inventory issues — is beginning to improve, according to the company's earnings call.
• The retailer's inventory level was down 30% YoY for Q1 2021, according to financial filings, though inventory was up more than 20% YoY at this point in 2020 as a result of store closures. When stores closed, Foot Locker canceled orders from suppliers and offered promotions in an attempt to move inventory. But when demand returned at higher rates than expected, it had to deal with much slower supply chains, which complicated inventory building.
• "As it relates to the West Coast ports, there is some good news to share," CEO Richard Johnson said on the company's earnings call. "Inventory flow and receipt velocity did improve as delays began to ease through the first quarter, and we expect further improvement in Q2, which should reflect positively on our inventory levels."

Dive Insight:

There are signs that port congestion is beginning to improve. But import levels are still elevated, and it's still taking longer than normal for facilities to process containers.

At the Port of Los Angeles, container dwell on the terminal dropped to an average of 4.2 days in April, down from its peak of 5 days in February, while street dwell time remained flat at an average of 6.6 days, according to the port's monthly press conference.

Retailers have had to work to incorporate these extended lead times into their plans. And Foot Locker said it is still working with its supply chain partners to optimize the flow of goods.

"We have been working with our vendor partners to utilize alternate ports and expedited rail and truck services to accelerate the flow of goods," Johnson said.

Just about every company has been dealing with a difficult reality when it comes to inventory management over the last year. Keeping up with demand while also navigating a supply chain full of delays and higher costs has complicated the landscape for shippers.

But Foot Locker is confident that its inventory levels will begin to moderate later this year as the port situation continues to improve.

"Our inventory levels will start to improve in the second quarter," Johnson said. "And some of that is that pushed out inventory, some of it is the cleaning up of the port."