Costco Expands Chartered Shipping to Add Supply Chain ‘Flexibility’

Costco chartered seven ocean vessels for the next three years to transport containers between Asia and North America, up from the original three vessels chartered for one year (see 2109240002), said Chief Financial Officer Richard Galanti on an earnings call Thursday for fiscal Q2 ended Feb. 14. “We've also leased containers for use in these ships,” he said. “With these additions, about a quarter of our annual trans-Pacific containers and shipment needs are being accommodated this way, which gives us additional supply chain flexibility.” Despite all the supply chain disruptions, “we're staying in stock and continue to work to mitigate cost and price increases as best we can,” said the CFO. "We've done a pretty good job" navigating the supply challenges, and "that's evidenced in our sales strength," he said. Sales in the quarter increased 16.1% to $50.94 billion and were up 16.4% in the fiscal first half to $100.35 billion. Container arrivals continue to be delayed, "so we continue to advance-order in many cases as we are able to," he said. "Chip shortages are still one of the things that are impacting many items, some more than others." Costco’s e-commerce sales in the quarter increased 12.6%, “on top of” a 75% year-earlier increase due to COVID-19, said Galanti. TVs and other consumer tech were among Costco’s largest online categories in Q2, rising by the high-single digits compared with “very strong sales increases a year earlier,” he said.