Retailers could see strong holidays
International Paper says strong box sales point to higher demand for goods
America’s holiday shopping season looks like it will turn out solid for retailers judging by all the boxes IP made in the past few months.
International Paper Co., the nation’s largest box producer, said its North American mills turned out 2.64 million tons of corrugated packaging in July, August and September — 1.5 percent more than in last year’s third quarter.
“We feel box demand is pretty darn strong,” IP chief financial officer Carol Roberts said.
Roberts commented after the Memphis manufacturer Thursday reported after-tax income of $312 million, compared to $220 million in the same period last year, when charges reduced earnings.
The company employs 56,000 worldwide, including 2,400 in Memphis, and ranks as the third-largest publicly traded corporation based in the city in terms
of the value of its stock.
Although the U.S. economy is moving relatively slowly, Roberts pointed out American consumers are the strongest element within the economy, which is measured by gross domestic product, or the total value of goods and services. While GDP rose 1.4 percent in the second quarter, after-tax corporate profits fell 2.4 percent.
“Consumers are the strongest part of GDP, and we think we’re a proxy for the consumer,” Roberts said.
With the uptick in jobs around the country, the National Retail Federation forecasts retail sales in November and December will reach $655.8 billion, a gain of 3.6 percent compared to last year. In 2015, holiday sales rose 3.2 percent. Throughout the nation, 144.7 million people were employed in September, a gain of 2.4 million workers in a year, and 12 million since 2011.
Stronger holiday sales could figure into higher profits for Memphis’ 55,000employee distribution industry, including FedEx Corp.
At International Paper, third-quarter sales revenue totaled $5.3 billion, down from $5.7 billion a year earlier. The decline traces mostly to the sale in China of the IP-Sun joint venture and the Asian corrugated packaging business, and the sale of the Carolina Coated Bristols business.
Earnings worked out to 75 cents for each share of outstanding stock, up from 53 cents a year ago, when costs related to asset sales diminished earnings.
Rising demand opens room for International Paper to raise prices in the coming months.
“We continue to see stable to improved market demand across most of our businesses, particularly North American industrial packaging,” IP chairman Mark Sutton said in a statement released by the company. “We have begun to implement the NA containerboard and box price increases and we remain focused on a fourth quarter close of the Weyerhaeuser pulp business acquisition.”
In May International Paper agreed to buy Weyerhaeuser Co.’s fluff pulp business for $2.2 billion. The pulp is used to make hygiene products, a growing market as the baby boom generation ages.