How bad are supply chains? Costco rents ships

By Julia Horowitz, CNN Business
Costco, which is home to the ultimate big box store, doesn’t mince words about what it’s like to run a consumer business in the midst of a pandemic.
“Inflationary factors abound: higher labor costs, higher freight costs, higher transport demand, as well as container shortages and delays at ports, increased demand in some categories. of commodities, various shortages of everything from computer chips to oils and chemicals, higher commodity prices, âChief Financial Officer Richard Galanti told analysts after the markets closed on Thursday. “It’s a lot of fun right now.”
Of course, “fun” is a word for this.
Pullback: Costco managed to beat Wall Street earnings expectations for its final quarter, pushing shares up 0.8% in pre-market trading. But the company has made it clear that the process of putting products on the shelves to meet increasing consumer demand remains a nightmare.
Furniture delays have doubled wait times for some products, forcing the company to stock up early. The circumstances are similar for toys, as well as for electronic devices such as computers, tablets and video games.
âWe order as much as we can and we get them earlier,â Galanti said.
Despite this, supply chains are so tangled that the company said it has chartered three ocean-going vessels for the next year to transport containers between Asia and the United States and Canada.
Remember: The complex network of ports, container ships and trucks that transport goods around the world is still very crowded after being out of sync last year, and shipping costs are skyrocketing. Steel containers have become incredibly rare and extremely expensive.
The situation is so bad that big companies are trying to take matters into their own hands (small companies, on the other hand, don’t have that luxury). Costco, which has leased several thousand containers to use on its charter vessels, said its fleet will make about 10 deliveries in 2022.
The New Playbook: Costco’s Strategy Is Spreading Through The Industry. Furniture giant Ikea bought its own shipping containers in an attempt to alleviate some logistical headaches. Walmart has also chartered ships to ensure they have enough stock for this year’s holiday season.
Costco’s business has held up despite its long list of supply chain problems and inflationary pressures. But not all businesses are equally resistant to the storm.
Nike slashed its full-year sales outlook on Thursday, although executives said “consumer demand has never been higher.” Shares are down 5% in trading before market on Friday.
âWe are not immune to the headwinds of the global supply chain which [manufacturing] and the movement of products around the world, âCFO Matthew Friend said on the company’s earnings call.
Watch this space: The effects of the Delta variant of the coronavirus are still happening and could make matters worse. Costco said it was reimposing limits on the purchase of toilet paper, water bottles and cleaning products due to an “increase in demand related to Delta.”
What’s next for Evergrande: break-up, bailout, or default?
The fate of ailing Chinese developer Evergrande remains unresolved after a deadline passed Thursday without the company saying whether it plans to pay nearly $ 84 million in interest owed to bondholders.
The latest: Investors may have to wait a little longer to find out if Evergrande will default on its massive debts. He now has a grace period of up to 30 days on the first deposit payment, reports my CNN Business colleague Laura He. A second payment of $ 47.5 million on another bond is due next week.
Evergrande stock plunged nearly 12% in Hong Kong on Friday, reversing a rally it sparked the day before after learning the company would pay interest on another yuan-issued bond to mainland Chinese investors. So far this year, stocks have plunged 80%.
Filling the information gap is fueling speculation that the Chinese government will have to intervene to limit the fallout caused by the collapse of one of the country’s largest real estate conglomerates.
Beijing has few good choices. He will want to protect the thousands of Chinese who have bought unfinished apartments, construction workers, suppliers and small investors, while limiting the risk of other real estate companies going bankrupt. At the same time, he’s been trying for at least a year to curb excessive developer borrowing and won’t want to dilute that post.
Speculation about an option – an effective nationalization of the company – was fueled Thursday after a regional financial news website, Asia Markets, announced that the Chinese government was finalizing a deal to restructure Evergrande with support for public enterprises, or public enterprises.
Citing anonymous sources close to the Chinese government, he said the plan would see Evergrande split into three separate entities and the restructuring could be announced within days. Neither Evergrande nor China’s main state-owned enterprise regulator responded to CNN Business’s requests for comment on the article.
Europe will demand USB-C chargers. Apple is not happy
The European Union has worked hard to hold big tech companies accountable for issues such as privacy, data security and antitrust law. His cause of the day? Well, it’s a little more⦠specific.
Catching up: The European Union on Thursday proposed new rules that will make USB-C ports standard on smartphones, tablets, cameras, phones, portable speakers and portable video game systems.
The move is a setback for Apple, which uses its own âLightningâ port on the iPhone. Although the new rules are years before they go into effect, Apple could be forced to make changes to its flagship, reports my CNN Business colleague Chris Liakos.
“European consumers have been frustrated long enough with the accumulation of incompatible chargers in their drawers,” EU chief technology officer Margrethe Vestager said in a statement. âWe have given the industry a lot of time to find their own solutions. Now [the] the time has come for legislative action for a common charger.
EU citizens own an average of three cell phone chargers, according to the European Commission, the bloc’s executive body. But 38% of consumers haven’t been able to charge their phone at least once because they didn’t have the right charger on hand.
Apple, for its part, is not satisfied, but said in a statement that it will continue to “engage with stakeholders to help find a solution that protects the interests of consumers.”
“We remain concerned that strict regulations requiring only one type of connector stifle innovation rather than encourage it, which in turn will hurt consumers in Europe and globally,” the company said.
Following
Carnival announces its profits before the US markets open.
Also today: US new home sales for August arrive at 10 a.m. ET.
Coming next week: Congress has an important choice to make. Will he raise the debt ceiling or will the United States default for the first time in history?
The-CNN-Wire
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