Get ready to pay more for goods as container shipping costs skyrocket
Large-scale global supply chain issues during the Covid pandemic have been weighing on individual companies, becoming a major reason for their declining profit margins and rising prices for consumer goods.
According to grill maker Traeger, the company saw an 11.7% year-over-year increase in sales in its third quarter, as it recorded $162 million in revenues. However, its gross profit margin of 33.5% represented a steep decline from 45.3% in Q3 2020.
“Bringing a 40-foot container from Asia to the US 12 months ago was about $1,500. Today, you’re spending upwards of $30,000 and we’re certainly averaging close to $10,000,” Traeger CEO Jeremy Andrus told CNBC on Monday.
“Our inventory is big and heavy. It takes up a lot of container space, and so we are particularly sensitive to transportation costs,” he added.
The chief executive also said he believes the elevated transportation costs will eventually ease, providing a boost for Traeger down the road as it competes in a grilling category that has expanded during the pandemic.
“We’re sensitive to a near-term shift. The world will right-size itself, in terms of these costs, and we will see some significant flow through to the bottom line,” Andrus said, adding: “But right now, we are driving the brand. We are thinking about the engine, the brand health. That’s what lasts long term.”
The lockdown measures intended to stop the spread of coronavirus have led to a surge in demand for goods, inflating the cost of containers. This has resulted in rising prices for all types of consumer goods. Experts say shipping costs will continue rising and the market will not start to settle until the middle of 2022.
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