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Supply chains are starting to come back online in China, says retail trade group CEO - CNBC

Some of the coronavirus-driven supply chain disruption in China is subsiding, National Retail Federation CEO Matthew Shay told CNBC on Thursday.

Shay said he's in touch with CEOs who have operations in the country and they tell him much of the needed inventory "is already pulled."

"It's either on the water or in the ports or in distribution centers," Shay said on "Power Lunch." "So we've got the supply, and the disruption in the Chinese supply chain is coming back online."

The next question is to what extent the coronavirus outbreak spreads in the U.S. and how it impacts consumer demand, Shay said. So far, Shay said, demand has held up and foot traffic to stores in the U.S. has stayed steady.

"I think we have to rely on the guidance of health-care professionals to direct us as to make all the preparations we should," Shay said. "But let's expect that we're going to be ready if we have to deal with this in the next couple months."

Shay's comments come one day after his trade group released its 2020 sales forecast. It projected retail sales to rise between 3.5% and 4.1%, surpassing $3.9 trillion.

The NRF forecast assumes the coronavirus does not become a global pandemic, and Shay said Thursday much of the planning for the 2020 forecast came before "we started to experience the severe reaction we're seeing in the market over the last few days."

"It's really based on the really strong fundamentals of the consumer economy," Shay said. However, the coronavirus does add uncertainty into a consumer landscape that otherwise contains low unemployment and rising wages, Shay said.

The degree to which supply chain disruption has minimized varies by company and segment, Shay said.

But, he said, "a number of the larger companies have started to indicate that the signs that they're getting from the Chinese market is some of the production is coming back online."

"I think there's a question of how long is that tail that works through the system to get those companies back to full strength and really producing goods at the rate they need them," he said.

Shay's remarks follow a warning Wednesday by former Macy's CEO Terry Lundgren, who said he believed retail supply chains had become too dependent on China. Lundgren cited the disruption and uncertainty from both the trade war and the coronavirus outbreak.

"Something like 90% of all footwear under $100 at retail are coming out of China," said Lundgren, who was Macy's CEO from 2003 to 2017. "And we all need to diversify that strategy."

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Supply chains are starting to come back online in China, says retail trade group CEO - CNBC
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