Dive Brief:
- Party City will be chartering vessels and leasing containers to shorten lead times as disruptions persist, CEO and Director Brad Weston said during a Q4 earnings call.
- Since the company's distribution centers are predominantly on the East Coast, the retail chain is also using East Coast ports with lighter traffic, said Weston.
- "The environment remains somewhat volatile and supply chain headwinds persist for the industry, which will be most evident in our Q1 results," said Weston.
Dive Insight:
It has been two years since COVID-19 was declared a pandemic, and supply chain challenges continue to disrupt business.
Schedule reliability dropped to a record-low in January at 30.8%, according to Sea-Intelligence. Low reliability has pushed retailers to take matters into their own hands. Chartering vessels can help ensure their products arrive on time.
The Home Depot and Ikea chartered vessels last year in response to delayed shipments and limited capacity at the ports. Costco and Coca-Cola went further, also leasing containers to help navigate the disruptions in the ocean shipping market.
The moves, though uncommon pre-pandemic, have helped retailers gain greater control over their supply chains.
Party City plans to charter vessels as it faces higher freight and raw material costs. Inventory was up and increased unit costs were "driven by higher input and freight expenses as well as increases in transit times," CFO and Executive VP Todd Vogensen said in the earnings call. The adjusted gross margin rate for the company increased nearly 450 basis points, to 38.9%, which was offset by about 120 basis points of headwinds from freight and input cost inflation.
The retail chain expects inflation and supply chain headwinds to persist in 2022.
