Costco, Nike and FedEx are warning there’s extra inflation set to hit shoppers as holidays method

A worker wearing a protective mask removes

David Paul Morris | Bloomberg | Getty Images

Delivery bottlenecks, which have led to rising freight costs, are a vacation headache for US retailers.

Cost co This week joined the long list of retailers on the alert about rising shipping prices and the associated supply chain problems. The warehouse clerk who a similar cautionary note in MayThe sportswear giant joined her Nike and economic pioneers FedEx and General mills when discussing similar concerns.

The cost of shipping containers overseas has increased in recent months. Getting a 40-foot container from Shanghai to New York cost about $ 2,000 a year and a half ago, just before Covid pandemic. It is now around $ 16,000, according to Bank of America.

In a conference call with analysts Thursday, Richard Galanti, Costco’s chief financial officer, called freight costs “permanent inflationary items” and said these increases are being combined with things that are “somewhat permanent” to add to the pressure. This includes not only freight, but also higher labor costs, increasing transport and product demand as well as scarcity of computer chips, oils and chemicals and higher raw material prices.

“We can’t hold onto all of this,” said Galanti. “Some of it has to be passed on, and it is passed on. We are pragmatic about it.”

To quantify the situation, he said inflation is likely to be between 3.5% and 4.5% for Costco. He noticed that Paper products saw cost increases of 4% to 8% and cited shortages in plastic and pet products that are driving prices up from 5% to 11%.

“We can hold the line on some of these things and do a slightly better job – hopefully a better job than some of our competitors and even more extreme than value,” said Galanti. “So I think all of these things have worked a little in our favor so far, at least despite the challenges.”

Prepare for the holidays

However, the timing is not good.

Persistent inflationary pressures come at a time when retailers prepare for the Christmas shopping season – Halloween, Thanksgiving, and Christmas, then the New Year. The pandemic brought it about a relentless array of factors After a generation of mostly moderate price pressure, this has made inflation an economic catchphrase.

Companies are forced to deal with the situation before a critical phase.

“We’re approaching the holidays, we’ve worked with retailers, and we see that # 1 they need to be flexible with their supply chain,” said Keith Jelinek, executive director of global retail practice at consulting firm Berkeley Research Group. “We noticed an increase in the cost of goods, especially for clothing, including the cost of inbound shipping with the cost of containers, increases in transport, truck transports to get to distribution centers.”

“All of these costs will weigh on operating profit,” he added. “Retailers are currently facing the challenge of how much I can pass on to the consumer, or how I can get other efficiencies out of my operations to meet my overall margin.”

Many companies have signaled that consumers are ready, at least for now, to accept higher prices. Trillions of government incentives during the pandemic helped increase personal wealth Household net worth increased by 4.3% in the second quarter.

In the company’s conference call on Thursday, Nike CFO Matthew Friend referred to the price increases in the second half of the year, as well as “more than expected full price realization” and “additional transportation, logistics and air freight costs to move inventory in this dynamic environment”.

Nobody knows how long consumers will be willing to pay higher prices. Jelinek said he anticipates the current situation will last at least during the holiday season and until early next year

“There is only a limited amount that you can give to consumers,” he said. “What most retailers do is think about theirs [profit and loss statements] and they want to improve performance and optimize efficiency. That means really focusing on your supply chain. “

It also means raising prices.

Corporate warnings

FedEx announced this week that it will add 5.9% to the shipping cost for domestic services and 7.9% for other offers. The company said it was hit by labor shortages and “costs related to the challenging operating environment”.

The head of the company’s main competitor admitted the hurdles the business is facing.

“The job market is tight and in certain parts of the country we have had to make some market price adjustments to respond to market demands.” UPS CEO Carol Tome said on CNBC’s Thursday, “Closing bell. “

She added that the company was also affected by supply chain issues.

“I’m afraid this will continue for a while. These problems have been a long time coming and we must all work together to remove these blockages, ”said Tome.

Federal Reserve officials this week admitted that inflation will be higher in 2021 than they expected. However, you can still see that prices will settle in a more normal range of just over 2% in the years to come.

But Cleveland Fed President Loretta Mester said in a speech on Friday that she saw “upside risks” for the central bank’s inflation projections.

“Many companies report that cost pressures are mounting and consumers are willing to pay higher prices,” she said. “The combination of strong demand and supply chain challenges could last longer than I expected, leading people and businesses to raise their expectations of future inflation more than we have seen before.”

Fed officials said they were ready to withdraw monetary stimulus They provided during the pandemic, but prices are unlikely to increase anytime soon. However, if prices and expectations stay higher, Mester said, Fed policies would have to be “adjusted” to control inflation.

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Trump foe Michael Avenatti sentenced in Nike extortion case

Attorney Michael Avenatti arrives at the U.S. courthouse in the Manhattan neighborhood of New York City (SDNY) in New York, United States, on July 8, 2021 for his hearing on his conviction in an extortion program against Nike.

Brendan McDermid | Reuters

Michael Avenatti, the cheeky lawyer who had been a major enemy of the then president Donald TrumpHe was sentenced Thursday to 30 months in prison for a brazen, botched plan to blackmail the sportswear giant Nike of up to $ 25 million.

That sentence was much less than the nine years, which was the lowest of the sentences proposed by federal guidelines, and nowhere near a “substantial” jail sentence being sought by federal attorneys for the California attorney.

“I alone have ruined my career, my relationships and my life. And there is no doubt that I will have to pay,” said Avenatti, 50, Manhattan Federal Court Justice Paul Gardephe tearfully before he was convicted.

“I am really sorry for all the pain I have inflicted on Mr. Franklin and others,” said Avenatti, referring to his former client, Gary Franklin, an amateur basketball coach.

Avenatti’s conviction came more than three years after he gained widespread fame and disgrace. for his bombastic portrayal of pornstar Stormy Daniels, who received a hush payment of $ 130,000 from Trump’s attorney at the time, Michael Cohen, ahead of the 2016 presidential election in order to keep silent about claims that she had sex with Trump years before he ran for the White House.

Daniels is one of several former Avenatti clients he is charged with on two other separate federal fraud charges, one of which is scheduled to begin in California next week.

Gardephe said Mr Avenatti’s behavior in the Nike program was outrageous.

“He kidnapped his client’s claims and used them to advance his own agenda of extorting millions of dollars from Nike for himself,” said the judge, who also sentenced Avenatti to three years of supervised release in the event that Avenatti was killed Sentenced in court last year.

“He really betrayed his client,” said Gardephe.

Franklin had hired Avenatti to reform Nike, which Franklin had claimed was corrupting amateur players and their families

Avenatti then used this request in early 2019 to not only demand a settlement with Franklin, but also a more lucrative advisory agreement from Nike for him and senior attorney Mark Geragos to avoid a press conference at which he would make Franklin’s allegations.

Avenatti warned Nike’s attorney that the allegations “could reduce your client’s market capitalization by $ 10 billion”.

“I don’t play around with it and I don’t play any more,” Avenatti told Nike lawyers shortly before his arrest.

Attorney Michael Avenatti is leaving the court after being convicted of an extortion program against Nike Inc. on July 8, 2021 at the U.S. Courthouse in New York City.

Brendan McDermid | Reuters

Gardephe noticed this language during Thursday’s hearing in which he said, “Mr. Avenatti was drunk from the power of his platform or how he perceived the power of his platform.”

But Gardephe added that Avenatti deserved a lighter sentence than the range recommended by federal guidelines – from nine years to 11 years and three months – because the judge said for the first time in the case: “Mr. Avenatti has expressed what I believe to be heavy regrets today. “

The judge also cited the brutal conditions under which Avenatti was held in a federal prison in Manhattan for several months after his arrest in 2019.

And Gardephe, in substantiating the lower-than-recommended verdict, pointed out that federal prosecutors did not prosecute Geragos even though they claimed he was actively involved in the shakedown with Avenatti.

The judge ordered that Avenatti, who remains in custody, must surrender on September 15 to begin his sentence, which Gardephe recommended to serve at the Sheridan, Oregon federal prison camp.

Avenatti’s lawyers had asked for a prison sentence of just six months.

During his statement to Gardephe, Avenatti noted that as a child, while other children dreamed of becoming professional athletes, said, “I dreamed of becoming a lawyer. Of becoming a trial lawyer.”

“About doing good and seeking and achieving justice.”

“I did just that for years, but then I got lost. I gave away my own values, my friends, my family and myself,” he said.

“I gave away my job. I was driven by the things that don’t matter in life. For the past two years, Your Honor, I’ve been thinking why this had to happen,” said Avenatti, who admitted he would never work as a lawyer again.

“I’ve learned that all the fame, the money motorism in the world is meaningless,” said Avenatti.

Avenatti collapsed and took a few moments to calm himself down as he discussed the effects of his behavior on his three children.

He said that most people want their children to be proud of their fathers, but in the case of his own three children, “I want them to be ashamed of him”.

“Because if you’re ashamed, it means your moral compass is exactly what it should be,” he said.

Avenatti will face indictment at his trial next week Crimes that involve defrauding customers for millions of dollars. One of these clients was a mentally ill paraplegic.

Avenatti will face charges of alleged fraud against Daniels in Manhattan federal court next year $ 300,000 in proceeds for a book she wrote.

As in the Nike case, Avenatti pleaded not guilty in the other two cases.

During Thursday’s conviction, U.S. Assistant Attorney Matthew Podolsky told Gardephe that Avenatti had a “profound lack of remorse” for his behavior.

“It’s about taking advantage of people and abusing power and trust,” said Podolsky.

“He saw Mr. Franklin as a way to get rich, to make Mr. Avenatti rich.”

But Avenatti’s attorney Perry pleaded forbearance, saying, “He had an epic fall, he was publicly shamed.”

Perry said that while Avenatti pursued and then achieved a legal career, “really wanted to be the David fighting the Goliath”.

But she remarked, “He’s certainly lost and he knows it.”

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“I can tell you … he’s a completely humble man who got beaten up by himself,” said Perry.

Perry also advocated a shorter term because Avenatti and Geragos were treated differently.

“It is impossible to distinguish between the conduct of Mr. Avenatti … and that of Mark Geragos, whom they did not charge at all,” said lawyer Danya Perry.

“The Nike lawyers, on the other hand, believed Mr Geragos was a full participant and felt as threatened and blackmailed by him as they were by Mr Avenatti.”

The contrast between the tearful Avenatti on Thursday and the sharp-tongued, Twitter-obsessed lawyer he was in 2018 was dramatic.

Avenatti has been beating Trump and Trump’s former personal attorney Michael Cohen for months this year after it was revealed that Cohen paid Daniels the hush money so as not to affect Trump’s chances of winning the White House. Trump denies having sex with Daniels.

After the hush money program was exposed, Avenatti has been an almost constant presence on cable television news attacking Trump and Cohen.

Avenatti’s notoriety and popularity with some of Trump’s opponents grew so high that at one point he flirted with running for the Democratic presidential run in 2020.

But the attorney’s commercial flash came as he staggered under millions in debt, a burden prosecutors alleged had committed the series of serious crimes he was charged with in early 2019.

Cohen, who spent more than a year in jail for crimes that included a campaign funding violation related to the payout of Daniels, said in a Twitter post that he heard Avenatti’s conviction over a phone line issued as a result of the Covid-19 pandemic has been set up.

“Despite my disdain for Avenatti for all the lies he said about me, I was glad the 108-135 month guideline was drastically reduced by a measured and logical judge,” Cohen tweeted. “Job well done by @Edanyaperry“He added, using the Twitter handle from Perry, Avenatti’s attorney.

Nike (NKE) reviews This fall 2021 earnings beat

Nike reported fourth quarter results and sales on Thursday, beating analysts’ estimates, fueled by record earnings in its largest market, North America.

It also offered a better-than-expected sales outlook for the year ahead, fueled by optimism about the women’s category, the apparel store, and the Jordan brand.

Nike continues to benefit from consumers looking for comfortable clothing for both exercise and at home. Even as people return to schools, offices, and other social facilities, many are still looking for more relaxed options like sneakers and stretchy pants.

Nike also saw a boost to its wholesale business – something that was largely inactive a year earlier during the Covid pandemic, when malls and department stores had to temporarily close their doors and pause orders for goods. Nike’s main wholesale partners include Dick’s sporting goods, Foot locker and JD Sports.

Nike shares rose more than 12% in after-hours trading.

Here’s how the company performed in the fourth fiscal quarter compared to analysts’ expectations using refinitive estimates:

  • Earnings per share: 93 cents vs. 51 cents expected
  • Revenue: $ 12.34 billion versus $ 11.01 billion expected

Nike net income for the May 31st period rose to $ 1.5 billion, or 93 cents per share, compared to a loss of $ 790 million, or 51 cents per share, last year. That exceeded analysts’ forecast of 51 cents per share, based on refinitive data.

Total revenue rose to $ 12.34 billion from $ 6.31 billion a year ago, beating estimates of $ 11.01 billion. The sale was helped by the company selling more goods at full price and less reliance on discounts.

In North America, Nike’s largest market, sales more than doubled to a record $ 5.38 billion as the company soared from a year earlier, when retailers were hit hardest by the Covid pandemic. Sales in the region increased 29% on a two-year basis.

In Greater China, sales rose only 17% to $ 1.93 billion. As one of Nike’s fastest growing markets, consumers in China have threatened a boycott after some Western brands like Nike raised concerns over allegations of forced labor in Xinjiang.

Management said Thursday that Nike is seeing improvement in China month after month.

“Building on our 40-year history in Greater China, we continue to invest in providing consumers with the best products Nike has to offer in locally relevant ways,” said CFO Matt Friend during a conference call following the win.

Digital sales increased 41% year-over-year and 147% year-over-year.

The company said its membership model will help boost its e-commerce business. Online purchases by Nike members, the first to gain access to exclusive products and other perks, hit a record $ 3 billion in the fourth quarter. According to its own statements, Nike now has more than 300 million members worldwide.

“Driven by our momentum, we continue to invest in innovation and our digital leadership position to lay the foundation for Nike’s long-term growth,” said Nike CEO John Donahoe.

For fiscal year 2022, Nike expects sales to grow in the low double-digit percentage range to over 50 billion US dollars. Analysts expected annual sales of 48.5 billion US dollars.

The company expects the first half to grow faster than the second half, said Friend.

“It’s important to note that as our business normalizes after the pandemic and the market continues to reshape, we don’t expect quarter-to-quarter linear growth,” he said.

Nike also anticipates delays in the supply chain and higher logistics costs, which will persist through much of fiscal 2022. The headache has plagued much of the retail industry for months. A shortage of containers and a shortage of truck drivers have, among other things, resulted in goods being blocked from the port to the warehouses to the houses of the buyers.

Nike stocks are down more than 5% since the start of the year. The company has a market capitalization of $ 211 billion.

See Nike’s full press release on the results here.

Nike cut up with Neymar after sexual assault investigation, report says

Lionel Bonaventure | Getty Images

Nike said it ended its partnership with Neymar da Silva Santos Jr. – better known as Neymar – when the soccer superstar refused to cooperate with an investigation into sexual assault allegations against him.

“Nike ended its relationship with the athlete because he refused to cooperate in good faith with an investigation into credible allegations of employee misconduct,” Nike said in a statement late Thursday.

The Wall Street Journal reported the news first.

The company announced last summer that it had split from Neymar but had not given a reason for the sudden move. The Journal reported that Neymar’s deal with Nike remained eight years at the time.

The company said it was “deeply concerned” by an incident the employee allegedly committed in 2016.

A spokeswoman for Neymar told the WSJ that it denies the allegations.

Nike said the employee reported the allegations in 2018 and initially wanted to keep them confidential and avoid investigation. As a result, Nike announced that out of respect for the employee’s privacy, no details have been disclosed to law enforcement agencies or third parties.

Nike announced it had commissioned an independent investigation into the allegations in 2019 when the employee expressed an interest in pursuing the matter. However, the company said the investigation was inconclusive.

“There weren’t any facts that would allow us to talk about it. It would be inappropriate for Nike to make an accusatory statement without being able to provide supporting facts,” the company said.

In 2017, Neymar left Spanish club FC Barcelona to move from Paris Saint Germain for a record transfer fee $ 263 million.

– CNBC’s Jessica Golden contributed to this report.