Costco, The Second Largest Retailer In The US, Flashed Back And Stopped Losses
Global retail giant Costco is exiting the shipping business as freight rates fall and ship capacity returns to the market . Along the way, the company says, it will deduct a hefty fee from proceeds to cover charter fees.
It is reported that Costco recently announced its performance report for the first quarter of fiscal year 2023, achieving total revenue of US$54.437 billion, a year-on-year increase of 8.1%; net sales of US$53.44 billion, a year-on-year increase of 8.1%; net profit of US$1.364 billion, a year-on-year increase of 3% increase.
The retail giant said in its performance report that it " will incur a charge of US$93 million (about 650 million yuan) during this period, mainly related to the reduction of its chartering business ." ordered seven ships and leased thousands of containers.
COSTCO claimed that due to increased congestion and soaring freight rates, COSTCO initially chartered three ships and leased thousands of containers, and subsequently chartered another four ships for a period of three years to save money .
And this includes relying on the support of COSTCO, the two rounds of "CARPATHIA" and "AS CARLOTTA" under MPCC will be leased by PASHA for a period of 42,000 US dollars per day, and the lease period will last for three years to May and September 2025 respectively.
COSTCO stated that the current global container shipping market has normalized, and the management believes that it is more beneficial for members to deliver goods in the traditional way. COSTCO does not want to engage in shipping business by itself .
Previously, in addition to COSTCO, many large retailers including IKEA, Walmart and Home Depot also chose to rent containers or general cargo ships last year and use their own containers.
In addition, freight forwarders and retail giants directly established their own shipping companies to deal with the serious shortage of shipping capacity in the global shipping market and bottlenecks in the supply chain, so as to ensure the safety of their own supply chains.
They use their own containers and have shipping contracts with trucking companies to cope with record rates and a lack of capacity . Owning these assets also allows shippers to avoid congestion at West Coast ports.
However, since September 2022 , consumer demand has fallen sharply, and spot freight rates have plummeted. Ocean freight rates from Asia to the United States have dropped from a high of US$20,000/FEU in the first half of 2022 to less than US$2,000 to the west coast and less than US$2,000 to the east coast. Below the $4000 level.
As a result, Costco has decided to suspend its chartering activities. Richard Galanti, the company's chief financial officer, said that Costco charters ships to improve the timely delivery and arrival of overseas goods and reduce transportation costs .
In the roughly 18 months since it started chartering, the company has moved 50,000 containers, saving $1,000 to $2,000 per container, Galanti said. Previously there needed to be ready product to drive sales and without chartering many containers would have been severely delayed, but these have now been reversed.
“With transit times now vastly improved, shipping costs and container costs much lower, it makes sense to scale back chartering and lower prices for our members.”
In September this year, after freight rates began to drop sharply, IKEA also announced the sale of containers and left the container market.