Retailers have come under tremendous pressure from investors to control costs amid the uncertainty brought on by the pandemic. Shipping bottlenecks, closed factories in China and Vietnam, and a shortage of raw materials have torn up supply chains in the United States in recent months, and forced companies to scramble to ensure they are have enough produce for the crucial holiday shopping season.
For the third quarter, Target’s cost of goods sold and selling, general and advertising expenses are expected to increase by about 10%, while Walmart’s operating expenses are expected to increase by almost 4% to 28.57 billion dollars, according to data from Refinitiv.
Walmart, the world’s largest retailer, will release results on Tuesday, while Target is expected to release results on Wednesday.
At the end of last month, e-commerce giant Amazon.com said it expects costs during the holiday season to reach around $ 4 billion, as higher wages and other disruption operations reduce the company’s windfall related to online purchases.
âIt’s a competitive market for labor, freight and customers. We believe most will be cautious heading into fourth quarter profitability, even with healthy sales,â said Greg Melich, Evercore analyst.
INCREASE IN RENTS, SALARIES
Rents for industrial warehouses are expected to rise 18-19% this year, according to real estate investment trust Prologis, whose clients include Walmart, Amazon and Target. For the full year, analysts expect Walmart’s rent spending to rise 7% to $ 3.28 billion, according to Refinitiv.
“Importers of clothing and footwear are essentially paying double what they paid for transport before the pandemic,” according to Jason Miller, associate professor of supply chain management at the Eli Broad College of Business of the Michigan State University.
Insurance and freight costs soared to 6.4% of the value of imported goods in September 2021, from 3.7% in September 2019, according to Miller, who analyzed data from USA Trade Online, which is maintained by the Census Bureau.
Logistics spending is also on the rise as retailers need more products across the country to meet growing consumer demand, Mark Manduca, chief investment officer of logistics company GXO, whose customers include Apple, Nike and Abercrombie & Fitch.
Meanwhile, a competitive work environment has driven wages up across the country.
Still, experts and analysts have said larger-scale retailers are in a better position to overcome these supply chain issues and pass higher prices on to buyers.
âEveryone faces higher expenses, but Walmart also has a much more efficient supply chain – they should have a really good holiday season, even with all the cost pressure,â the analyst said. Telsey Group, Joe Feldman.
Holiday sales in the United States could rise 10.5% to $ 859 billion, according to one forecast.