As a result of the worldwide supply chain problems caused by the Covid pandemic, several businesses have seen their profit margins shrink, and their consumer products prices increase.
Growing shipping costs, according to Traeger CEO Jeremy Andrus, were a significant factor in the grill maker’s dropping profit margin in its third quarter. Traeger’s average cost to ship a 40-foot container to the U.S. from Asia is almost $10,000, more than five times the $1,500 a year ago; the CEO revealed while speaking with CNBC’s Jim Cramer on Monday 22 November.
“Bringing a 40-foot container from Asia to the U.S. 12 months ago was about $1,500. Today, you’re spending upwards of $30,000, and we’re certainly averaging close to $10,000.”
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In its third quarter, grill producer Traeger reported an 11.7 percent year-over-year rise in sales, with revenues totaling $162 million. Nevertheless, its gross profit margin of 33.5 percent reflected a significant decrease from the previous quarter’s gross profit margin of 45.3 percent.
CEO expects shipping costs to decrease
In addition, Traeger’s chief executive also said that he expects the increased shipping costs will ultimately subside, which would benefit the company in the long run as it competes in a grilling sector that has grown in recent years during the epidemic.
“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 stated, adding: “But right now, we are driving the brand. We are thinking about the engine, the brand health. That’s what lasts long term.”
A spike in demand for goods due to the lockdown measures implemented to prevent the spread of the coronavirus has increased the price of shipping containers. Andrus’s remarks provide insight into how large-scale supply chain concerns during the Covid epidemic affect individual firms.
“Our inventory is big and heavy, and it takes up a lot of container space, and so we are particularly sensitive to transportation costs.”
Ultimately, all sorts of consumer and manufacturing items have seen an increase in price as a consequence of this trend, with global semiconductor chip shortages significantly affecting the electric vehicle (EV) industry.
Overall, shipment prices are expected to continue to rise, with the market not beginning to stabilize until the middle of 2022, according to industry experts.
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