Water Transport Sinking This Holiday Season

The holiday season isn’t treating all major shipping companies equally this year. Many analysts continue to expect that retail will be soft as anxiety surrounding ongoing debt concerns both in the U.S. and Europe keeps consumers wallets close to the belt. This has had a negative impact on those companies specializing in water delivery while boosting the number of packages delivered locally.

FedEx (FDX), normally considered a bellwether for the broader market though says it anticipates it own business will benefit from a 12 percent rise in packages. The shipping leaders are looking to deliver around 260 million shipments between Thanksgiving and Christmas, but said the larger part of the volume would fall under its SmartPost residential service program. SmartPost deliveries are primarily lightweight residential deliveries rooted in e-commerce.

These sorts of deliveries are cutting into the bottom line of brick and mortar retailers, who anticipate only a 2.8 percent rise in sales this holiday season as opposed to last years 5.8 percent growth rate. It also seems to be a trend that works against companies that specialize in water transport. The rise in packages for FedEx seems to be doing little for those institutions that specialize in oil delivery, as the shaky economic picture cuts into the amount of energy being consumed.

Earlier in the week, Frontline (FRO), a water transport company that specializes in oil delivery, announced that it may run out of money by early 2012 should the market continue at its current levels. Frontline said too many vessels and too few deliveries are negatively impacting its bottom line, cutting third quarter profits from $48.4 million in 2010 to an operating loss of $135.8 million this year. That situation is much worse than analysts had expected and caused the stock to tumble as much as 41 percent on the day. YTD, shares of Frontline, the largest independent player in the oil tanker industry and generally considered a bellwether, have plunged close to 90 percent. 2012 is not expected to bring much relief according to the earnings announcement. While the 4Q may see some improvements, a recovery for water transport companies, especially those that specialize in oil, will be protracted and painful.  Frontline’s warning of a potential restructuring has caused a ripple throughout the industry. Need for potential restructuring shook similar stocks from Overseas Shipbuilding Group (OSG) to tumble close to 20 percent.

The decline of these companies may signal a boon for the top online retailers that can offer the best deals, like Amazon (AMZN), who continues to improve its holiday sales each year. With competitive pricing in areas from toys to books and electronics, in addition to the appetite for the company’s latest tablet, the Kindle Fire, Amazon could be potentially responsible for the uptick in packages reported by Fed-Ex.

Even with these elements on the side of Fed-Ex though, the company’s lowered outlook for the 2011 fiscal year has not changed.