U.S. back-to-school shipments returning to normal: Union Pacific CEO

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[June 29, 2017]  By Sophia Kunthara

(Reuters) - U.S. retailers may see a much-needed boost from the coming back-to-school shopping season if the pickup in incoming merchandise traffic from Asia seen by the largest U.S. railroad is any guide.

Lance Fritz, chief executive officer of Union Pacific, speaks during an interview in New York, U.S., June 28, 2017. REUTERS/Shannon Stapleton

Lance Fritz, chief executive of Union Pacific Corp, said trans-Pacific volumes overall remain one of the company's softer areas because of overcapacity issues, but back-to-school related shipments were showing signs of rebounding.

"Our consumption of goods in the United States and in the world took a little bit of a pause, and that's how they got into an overcapacity situation," Fritz told Reuters in an interview on Wednesday. "It's exhibiting normal seasonality this year, which is good."

That could augur well for the key back-to-school shopping season as it shows stores have the confidence to build stock. Back-to-school is the second-most important selling season for U.S. retailers after the end-of-year holidays.

Thomson Reuters' Same Store Sales Index, which tracks sales from stores open at least one year, indicates a 1 percent growth rate for the third quarter of 2017, which covers the back-to-school season through August and September.

That would match 2016's back-to-school performance and mark the strongest showing so far this year, according to Jharonne Martis, director of consumer research for Thomson Reuters. Same-store sales fell by 0.1 percent during the first quarter, and are on pace for a 0.6 percent gain in the second quarter.

About 40 percent of Union Pacific's overall volumes stems from international trade, Fritz said. About 12 percent of that relates to Mexico and most of the rest is associated with trans-Pacific traffic.

Inbound shipping container traffic at the ports of Los Angeles and Long Beach, the two largest West Coast ports and key hubs for Union Pacific's international intermodal business, also point to recovering volumes.

After slumping in February, traffic has built for three consecutive months. May volumes at Los Angeles were the highest since January and at Long Beach were the highest since August 2015.

Fritz also said the company's energy-related volumes were also seeing strength, particularly demand for shipping of hydraulic fracturing supplies and coal.

(Reporting by Sophia Kunthara; Editing by Dan Burns and Andrew Hay)

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