Giant US retail group Costco is cutting exposure to container ships as rates slump and capacity supply improves.
The company claimed last year to have chartered three small vessels for three years, and some box capacity, as congestion rose and freight costs rocketed.
Chief financial officer Richard Galanti has now told analysts on a conference call that Costco later added four more ships, as well as more boxes, to save money.
But he also said the group will take a $93m charge in its first quarter ending 20 November “mostly related to downsizing our charter shipping activities”.
“You will recall that the supply chain challenges related to shortages of the containers, and shipping delays greatly intensified, with container freight and shipping rates skyrocketing,” Galanti said.
He explained that the group also wanted to improve shipping times.
“This allowed us to better stay in stock and drive sales; and … to reduce some of the skyrocketing shipping and associated container costs. We achieved those objectives for a period of time.”
Over the course of 18 months Costco was able to control the shipping and delivery of nearly 50,000 containers, he said.
Many of these would have been greatly delayed.
The group estimates it saved between $1,000 and $2,000 per container.
Costs much lower
“That, of course, fluctuated. Now, with a dramatic improvement in shipping times and much lower shipping and container costs, it made sense to downsize our commitment and lower prices for our members,” Galanti concluded.
Other big chains such as Walmart, Home Depot and Ikea were also reported to have chartered vessels, but brokers were sceptical.
One source told TradeWinds last year there was no evidence of direct chartering and the deals probably just represented the shippers taking extra space and trying to show the big lines they could operate independently.