Cost of shipping a container from Asia jumped over 500% since last year, Traeger Grills CEO says
- Rising shipping expenses were a major reason for Traeger Grills' declining profit margin in its third quarter, CEO Jeremy Andrus told CNBC on Monday.
- Traeger's average cost to ship a 40-foot container to the U.S. from Asia is almost $10,000, up from $1,500 a year ago, he said.
- "Our inventory is big and heavy ... so we are particularly sensitive to transportation costs," he said.
Traeger CEO Jeremy Andrus told CNBC's Jim Cramer on Monday that rising shipping expenses were a major reason for the grill maker's declining profit margin in its third quarter.
"Bringing a 40-foot container from Asia to the U.S. 12 months ago was about $1,500. Today, you're spending upwards of $30,000 and we're certainly averaging close to $10,000," Andrus said in an interview on "Mad Money."
"Our inventory is big and heavy. It takes up a lot of container space, and so we are particularly sensitive to transportation costs," added Andrus, whose comments offer insight into how large-scale supply chain issues during the Covid pandemic weigh on individual companies.
Traeger saw an 11.7% year-over-year increase in sales in its third quarter, as it recorded $162 million in revenues. However, its gross profit margin of 33.5% represented a steep decline from 45.3% in Q3 2020.
Wall Street is paying close attention to which companies demonstrate pricing power during this inflationary period and pass their higher input costs onto consumers, helping to protect margins. In Traeger's case, that was the financial metric many investors have latched onto since the company posted results Nov. 15, Cramer said.
Shares of Traeger, which went public in late July, reached an all-time low of $14.03 during Monday's session. The stock is down about 28% in the past five sessions. Its record high of $32.59 per share came Aug. 10.
Andrus told Cramer he believes the elevated transportation costs will eventually ease, providing a boost for Traeger down the road as it competes in a grilling category that expanded during the pandemic.
"We're sensitive to a near-term shift. The world will right-size itself, in terms of these costs, and we will see some significant flow through to the bottom line," Andrus said. "But right now, we are driving the brand. We are thinking about the engine, the brand health. That's what last long term."
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