A truck driver works in front of shipping containers stacked up at Pusan Newport Terminal in Busan, South Korea, July 1, 2021. Picture taken on July 1, 2021. REUTERS/Kim Hong-Ji
(Bloomberg) — Shipping costs and lag times are wreaking havoc on profit margins at Dollar Tree Inc., which relies on a steady volume of cheap goods to make money at low prices.
A global rebound in consumer demand for all sorts of goods is putting strain on shipping networks and ports. And new surges in Covid-19 cases have caused some ports to close or slow down entry. Transit times are about 30 days longer than in recent years, Dollar Tree said Thursday, citing freight industry contacts. That’s tough for a company that brings in almost 90,000 40-foot containers a year.
In a recent case, Dollar Tree had a dedicated charter vessel turned back from a port in China because a single crew member tested positive for Covid-19, Chief Executive Officer Mike Witynski said on an earnings call. The voyage was delayed by two months because the ship had to go to Indonesia and replace the entire crew.
“We believe the Dollar Tree banner imports more containers per $100 million in sales than other large retailers, and combined with our low $1 price point, we have an outsized impact from freight costs,” Witynski said. The company’s second-quarter sales missed analysts’ estimates, and its forecast for the current quarter disappointed, sending the shares down as much as 11%.
© 2021 Bloomberg L.P.
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