SAN FRANCISCO clothing retail giant gap saw improved operating margins in the third quarter due to lower air freight rates, according to a November 17 earnings call, reports Washington DC's SupplyChain Dive.
Freight costs have been trending down, normalising spending levels in comparison to 2021's high-rate environment, said Gap chief financial officer Katrina O'Connell.
The retailer expects to reap even greater air freight benefits next quarter as rates continue to normalise, Ms O'Connell noted.
Retailers have been optimistic about freight-related tailwinds heading into 2023 as rates become more favourable in comparison to the past year's elevated cost environment.
'Air freight contributed 200 basis points of leverage as spend levels normalised during the quarter, and [Gap] lapped the US$70 million of incremental air freight expense last year,' said Ms O'Connell.
Although air cargo rates are still higher than in 2019, spot rates have seen a steady decline as capacity constraints soften. In September, spot rates were down nine per cent year on year and down 20 per cent in October, according to previous reports from Clive Data Services.
The retailer's transportation costs skyrocketed last year as Gap spent hundreds of millions of dollars to move inventory by air to avoid ocean congestion and disruption, spending $245 million on air freight alone in Q4 2021.
At the time, Gap noted that they hoped to spend roughly 20 to 25 per cent less on air freight in 2022, and expected that in 2023, it would rely less on air transport.
Discount retailer Burlington also noted lessening supply chain headwinds in Q3, with CEO Michael O'Sullivan noting in a November 22 earnings release that the company is seeing improvements in freight rates.
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Freight costs have been trending down, normalising spending levels in comparison to 2021's high-rate environment, said Gap chief financial officer Katrina O'Connell.
The retailer expects to reap even greater air freight benefits next quarter as rates continue to normalise, Ms O'Connell noted.
Retailers have been optimistic about freight-related tailwinds heading into 2023 as rates become more favourable in comparison to the past year's elevated cost environment.
'Air freight contributed 200 basis points of leverage as spend levels normalised during the quarter, and [Gap] lapped the US$70 million of incremental air freight expense last year,' said Ms O'Connell.
Although air cargo rates are still higher than in 2019, spot rates have seen a steady decline as capacity constraints soften. In September, spot rates were down nine per cent year on year and down 20 per cent in October, according to previous reports from Clive Data Services.
The retailer's transportation costs skyrocketed last year as Gap spent hundreds of millions of dollars to move inventory by air to avoid ocean congestion and disruption, spending $245 million on air freight alone in Q4 2021.
At the time, Gap noted that they hoped to spend roughly 20 to 25 per cent less on air freight in 2022, and expected that in 2023, it would rely less on air transport.
Discount retailer Burlington also noted lessening supply chain headwinds in Q3, with CEO Michael O'Sullivan noting in a November 22 earnings release that the company is seeing improvements in freight rates.
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