Higher fuel and transportation expenses weighed on retailers' supply chains in the third quarter, even as fulfillment improvements helped some companies contain costs. Amazon reported shipping costs rose 11% year over year against a 12% increase in units, while Tractor Supply's gross margin fell to 36.4% from 37.4% on higher transport and fuel costs. Carter's said port congestion and container availability issues left inventory below plan, with inventory totaling $587 million, down 11%.
According to FreightWaves, higher fuel and transportation expenses weighed on retailers’ supply chains during the third quarter, even as fulfillment improvements helped some companies contain costs. Early reports from Amazon, Tractor Supply and Carter’s point to an uneven environment heading into the holiday season, with shipping inflation alongside isolated delays in getting merchandise into inventory.
Amazon offsets fuel and line-haul inflation
Amazon (NASDAQ: AMZN) reported on its earnings call that its fulfillment operations faced higher fuel costs and line-haul rates on long-distance trucking between facilities. Better inventory placement, shorter shipping distances and package consolidation nevertheless helped lower its cost to serve customers.
Shipping costs rose 11% from a year earlier, compared with a 12% increase in units. Excluding fuel and line-haul inflation, shipping expenses increased 8%, indicating that operational improvements helped the company handle additional volume without a proportionate increase in shipping costs.
Tractor Supply margins squeezed by transport costs
Tractor Supply’s (NASDAQ: TSCO) third-quarter results showed a more direct effect from rising logistics expenses. The company attributed gross-margin pressure primarily to higher transportation and fuel costs, alongside investments in pricing.
Gross margin declined to 36.4% from 37.4% a year earlier, even as sales increased 5.1%. Retailers are facing added pressures from rising distribution expenses while they continue investing in competitive prices.
Carter’s inventory falls below plan on port congestion
Carter’s (NYSE: CRI) highlighted a challenge in the timing of inventory arrivals. Management said on its third-quarter call that port congestion and container availability issues had left inventory somewhat below plan.
Inventory totaled $587 million, down 11% from a year earlier. The company said the disruptions had not materially affected its business to date.
“Supply-chain performance weighs on retailers’ holiday profits, as higher freight costs squeeze margins while late merchandise can miss its selling window and require discounts.” — FreightWaves report
The source notes that a focus on efficiency pointed up how effectively retailers can offset external cost pressures by improving the movement and placement of goods. The three early reports suggest shipping inflation and inventory timing will remain variables for retailers through the holiday quarter.
Source: FreightWaves
Compiled from international media by the SCI.AI editorial team.
