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Bubble Wrap is deflating — and so is the American consumer

The maker of Bubble Wrap is seeing shares tumble Thursday after a brutal earnings announcement — and the implications go beyond the packaging industry. Get more news about Best Price Bubble Wrap,you can vist our website!

Sealed Air, which specializes in packaging supplies for e-commerce, meat, industrial goods and others, expected to see volume grow by 3% in 2022 but instead saw it drop by 6%.

Such declines were particularly pronounced in Sealed Air’s “protective” sector, which omits food. Volumes in protective were down a whopping 20% in the last quarter of 2022. Food packaging volumes dropped by 3%.

Meanwhile, the cardboard industry reported in Q4 that it saw box shipments decline by 8.4% compared to the last three months of 2021. That’s the largest downturn since the Great Recession.

The end of 2022 was pretty weak for trucking, too. In December, the Logistics Managers’ Index fell into contraction mode for the first time since April 2020. That was particularly spooky considering the fourth quarter of the year is when the trucking industry heats up in preparation for the holiday shopping season.
Inflation has forced many to spend less. That includes decreased spending on discretionary e-commerce goods and even grocery goods that Sealed Air specializes in packaging. Executives noted on Thursday’s earnings call that consumers were buying less “premium” protein, like red meat.

What’s more, Sealed Air executives said “destocking” is preventing more demand for their products. Retailers accrued more and more inventory through 2021 and ’22, but consumers suddenly cut back their spending last spring. That left big-box stores like Target and Walmart with “inventory bloat” — too much stuff and not enough sales.

There’s less demand for packaging products like Bubble Wrap (and Bubble Wrap-lined envelopes) even right now because of how overstocked some retail inventories have become. The U.S. Department of Commerce said Wednesday that American wholesale inventories saw their smallest decrease in 2.5 years in December.

Sealed Air CEO Ted Doheney said on the investor call that decreased consumer spending is clear “especially in things like electronics and e-commerce.”

Indicators outside transportation or packaging suggest a struggling consumer, even amid record-low unemployment. The rising cost of food, fuel and housing appears to be forcing consumers to put more on their credit cards and save less cash.

Credit card balances saw their biggest increase in 20 years from the second to third quarter of 2022, according to the latest available data from the Federal Reserve Bank of New York. Americans saved just 3% of their monthly income in ’22, down from highs in ’20 around 30% and even the pre-COVID rate of around 8.8% in ’19, The Wall Street Journal reported in January.
An uptick this summer — or sooner?
Despite that, trucking may be showing some early indicators of a recovery in the goods economy — or at least that it has hit the bottom. FreightWaves SONAR truckload data suggests the market is firming up. And mega-carriers like Knight-Swift believe the market will rebound by this summer. Sealed Air’s Doheny believes the second half of 2023 will be cheerier. “The outlook for these markets is to stay challenged in the first half with a rebound in the second half of 2023,” he said.