Macy’s cuts shipping costs after renegotiating major carrier deals – Sourcing Journal

Macy’s renegotiated carrier contracts in the second quarter enabled it to secure better rates and lower shipping costs.

According to Adrian Mitchell, Macy’s chief financial officer, the company reported a 0.5 percent decrease in shipping costs compared to last year, when they represented 4.5 percent of total net sales.

The department store chain ships orders using UPS and the US Postal Service, but didn’t say which contracts it adjusted. The news came as FedEx increased tariffs and high-season fees for 2024. UPS hasn’t announced rate increases yet, but these are often in line with its biggest competitor

“Shipping costs have been part of some of the cost saving initiatives that we have been thinking about. They affect the combination of how our goods are placed in our system and also how we think about handling our delivery,” Mitchell told Wall Street analysts last month. “It’s still an opportunity for us. We continue to benefit from some of the newly negotiated terms regarding our transportation costs.”

Mitchell has been vocal about cutting shipping costs after costs accounted for 5.9 percent of net sales. Macy’s is trying various tactics such as: B. Sending fewer partial deliveries and handling store operations more efficiently, with a particular focus on improving order throughput per man-hour.

Macy’s delivery cost cuts come as more retailers feel the benefits of falling freight rates compared to last year, with the department store also reporting improvements in inbound container costs. As of August 31, the Drewry World Container Index (WCI) is $1,739.59 per 40-foot container, down 69 percent from last year’s $5,661.69 per container and 83 percent down from September 2021 Highest value of $10,477.

On a weekly basis, the overall index is down 1.6 percent from $1,768.33, the second consecutive week the index fell after six consecutive weeks of gains.

Despite the positive trends, Drewry doesn’t think shippers should commit to long-term rates just yet.

PVH Corp., owner of Tommy Hilfiger and Calvin Klein, said ocean freight prices were less than half what they were a year ago and air freight spending fell “significantly” this quarter. It expects favorable freight rates to improve this year’s gross margin compared to 2022.

The apparel giant used “virtually no air freight” during the period, continuing the trend of the first quarter.

According to CEO Stefan Larsson, PVH has made “significant progress on our delivery times, which are now shorter than before the pandemic”.

Lululemon also saw an improvement in profits from healthier supply chain costs. In the second quarter, the company reported gross profit of $1.3 billion, or 58.8 percent of net sales. This was 2.3 percent better than the same quarter last year, thanks to a 3.3 percent increase in product margin due to better freight rates.

Lululemon forecasts full-year gross margin growth of between 1.9 and 2.1 percentage points compared to 2022. The outlook reflects lower air freight costs, which are expected to decrease by approximately 210 basis points (2.1 percentage points) for the full year.

Meghan Frank, chief financial officer (CFO) of the yoga apparel seller, told investors that lower air freight costs helped reduce inventory more than the chain had anticipated. The retailer expected it would have 20 percent more inventory than 2022, but only reported an increase of 14 percent, or $1.66 billion.

Cargo tailwinds also benefited Academy Sports + Outdoors, improving gross margin.

The sporting goods retailer is aiming for a 1 percent improvement in the adjusted EBIT margin in the supply chain area.

“We intend to achieve this by increasing the productivity of our units, leveraging existing distribution capabilities, reducing our e-commerce fulfillment costs, reducing turnaround times and leveraging transportation costs,” CFO Michael Mullican said on a recent earnings call. “We are also taking additional steps to improve supply chain logistics and productivity by implementing consistent processes and procedures, increasing cross-stocking and multi-store deliveries, and investing in technology to improve product flow visibility.”

Academy is migrating to Manhattan Associates’ warehouse management system and expects to have one of their distribution centers up and running with the new system within the next year.