Dive Brief:
- Joann is adjusting its freight strategy by contracting with a “wide range of ocean freight carriers compared to fiscal 2022,” CEO Wade Miquelon said during a Q1 earnings call in early June.
- The retailer has “wrapped up” annual negotiations with its ocean freight carriers and expanded capacity under contract. The increased capacity is set to allow for more timely deliveries and “ensure a strong in-stock position ahead of our all-important fall and holiday season,” Miquelon said.
- With the new ocean service contracts, “we expect to have more operating flexibility,” Miquelon said. But “we expect the ocean freight market to remain extremely volatile through the balance of the year,” he said.
Dive Insight:
Joann spent about $35.3 million to free up stranded containers during Q4. With new ocean service contracts and added capacity, Joann is trying to better control its freight-related costs.
The craft retailer faced $28.9 million of excess ocean freight and related supply chain costs in Q1, contributing to an 11% decline on gross profit YoY.
Abercrombie & Fitch has also “added some new carriers, which is exciting,” CFO Scott Lipesky said in a Q1 earnings call. The goal “is to have optionality and flexibility and hopefully that will result in lower rates.”
With supply constrained, more companies have had to expand their sourcing base which meant adding more carriers “for greater reach and depth,” according to Brian Whitlock, senior director and analyst at Gartner’s supply chain practice.
“The past couple of years created a lot of strain on organizations, particularly with their ocean contracts,” he said.
While most companies added carriers to unlock capacity, Whitlock noted that over time, a diversified contract base leads “to new or better relationships that could potentially be leveraged for better cost over time.”
Besides adjusting its freight plan, Joann has also made capital investments to solidify its supply chain and cut down on costs. The company is set to launch an e-commerce fulfillment center from their multipurpose distribution center in West Jefferson, Ohio, during the third quarter to reduce reliance on its store network.
