Red Sea Shipping Crisis Could Reignite Inflation, Warns Tesco

(Bloomberg) -- Shipping disruption in the Red Sea could lead to inflation on some consumer goods, Tesco Plc’s chief executive officer said Thursday.

“If they do have to go the whole way around Africa to get to Europe, it extends shipping times, it constrains shipping space and it drives up shipping costs,” Ken Murphy said on a call with journalists. “So that could drive inflation on some items, but we just don’t know.”

A string of attacks by Yemen-based Houthi rebels on commercial vessels transiting the Red Sea to the Suez Canal have sharply increased short-term rates for container shipping between Asia, Europe and the US. Coming not long after pandemic-era disruption, it has once again forced retailers to consider the resilience of their supply chains.

Read More: Spot Container Shipping Rates Soar 173% on Red Sea Threats

Murphy’s comments echo those of other retail bosses. Marks & Spencer Group Plc CEO Stuart Machin said Thursday the company is anticipating some slight delays delivering new items across clothing and homeware in February and March. 

“We’re conscious of the costs and more importantly the availability of new ranges,” said Machin, speaking on a call with reporters. “It’s something that’s impacting everyone and it’s something we’re very focused on.”

M&S said it won’t increase prices on clothes this year, while noting that the unrest in the Red Sea may add costs to the business. 

Simon Roberts, CEO of J Sainsbury Plc, said Wednesday that his supermarket chain is working closely with the UK government to mitigate the Red Sea impact. Last week Next Plc’s CEO Simon Wolfson said the situation would affect most of its stock.

Still, Murphy played down the direct impact on Tesco, saying the proportion of goods shipped via this channel is lower for Britain’s biggest supermarket than for other retailers. Big fashion chains like Next and M&S source many goods from China, India and Bangladesh.

 “We don’t have as much product coming through the channel as other people do,” said Murphy. “And then we have alternative sources of supply if we need them.”

(Adds M&S CEO comments from fourth paragraph.)

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