Amazon, retailers paid more for freight in 3Q
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.
A focus on efficiency pointed up how effectively retailers can offset external cost pressures by improving the movement and placement of goods. Amazon (NASDAQ: AMZN ) reported benefits from its fulfillment network, while Tractor Supply (NASDAQ: TSCO ) cited transportation costs as a drag on margins. Carter’s (NYSE: CRI ), meanwhile, reported inbound shipping disruptions that left inventory below plan.
Amazon said 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’s 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 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.
Why it matters: Supply-chain performance weigh on retailers’ holiday profits, as higher freight costs squeeze margins while late merchandise can miss its selling window and require discounts.
Read more articles by Stuart Chirls here .
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