The Europris chief expects the increased shipping costs to translate into higher prices next year. However, he is willing to sell at a loss to maintain market share, if necessary.
The global supply crunch has seriously affected retail trade, with container shipping rates from Asia multiplying several times.
Europris, one of the country’s largest importers, announced Thursday that the company is negotiating fixed freight agreements for 2022 and that freight costs are expected to rise.
– We guarantee that the goods will arrive home at a fixed price, and we have received what we ordered. The challenge for others is that they don’t get the containers, says Espin Eldal, CEO of Europris for E24.
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During today’s presentation of the company’s third-quarter results, it was clear that the strategy was assertive.
Dal said: – We exist because of low prices (..) And for prices to be low, you must have the lowest costs.
Margin will decrease next year
He doesn’t want to say how much shipping costs will increase next year, and points to ongoing negotiations.
—But we clarified that part of the increase in gross margin (profit, editor’s note) in the third quarter, is due to hedging agreements on freight rates (in 2021, editor’s note), says E24.
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Europris generated a gross profit of NOK 911 million, which equates to a margin of 45.7 percent in the third quarter. This is an increase of 1.8 percentage points over the same period last year, up from NOK 833 million.
It is also well above the historical average of about 43 percent. According to the head of Europris, this gives a better indication of how shipping costs will affect profits in 2022.
– Next year, one should think the margin will drop where it has historically been, Eldal tells E24.
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However, Europris will not increase demand and secure more cargo space on container ships from Asia in 2022 than necessary.
The company doesn’t say how many containers are involved, but it’s around “thousands,” but not “tens of thousands,” according to Dahl.
We will not buy more space than we need because the more space you provide, the more it costs. For our part, it’s very much about securing space for the volume we think we’ll sell, says the Europris director.
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– very Difficult
He adds that commodity prices are also rising. At the same time, unexpected production means that goods must be ordered earlier or earlier.
For example, summer merchandise for 2022 was ordered in May of this year, before this year’s summer season, the CEO of Europris explains.
– It’s tough in the commodity market. Production capacity in China is under pressure, as the energy savings they make by shutting down certain regions make the entire market very difficult, Eldal says.
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decide the competition
He does not want to estimate how much the increase in commodity prices will be reflected in commodity prices.
– There will be higher costs. Then we go there where we live on market prices, and we don’t do that kind of increase (extra cost, editor’s note) on our prices but have to follow the price on the market, says Eldal.
How will customers notice this?
– I think customers will notice that the prices of some products will go up, while others will remain stable. The Europris chief says this will be determined by competition.
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You must follow the market
Would you be willing to sell certain products at a loss to maintain market positions and attract customers to the store?
Selling at a loss that does not last over time. But if you have to do it in certain periods, then you should do it. We are no different from others, we are completely dependent on customer traffic and they are the people we live their lives, says Europris Director and continues:
If the market price is set at some level, we must follow it. We cannot get ourselves out of the market. But we have this flexibility when dealing with a wide range of commodities. If it becomes too difficult for a category or product, I can scale it down or focus on something else.
There is still a shortage of some items
– Slight increase in prices
The Europris president also believes that competition in parts of the market will be tougher as a result of increased shipping costs.
Eldal points out that consumers benefit from it.
– We’re out and about now, and now Christmas is especially important to us. The price of Christmas items has already remained the same, and there is a slight increase in prices in the market. I think people roll up their sleeves and are ready to put up a good fight, he says.
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Europress put supply issues and commodity price increases to shame in the third quarter, the best three-month period between July and September on record for the company.
Europress president Radhi was able to say in the morning hours on Thursday that the coronavirus pandemic has in no way dampened the demand for dish towels, shampoo and dog food.
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exactly the contrary. Europris with its 269 online outlets and stores generated sales of nearly NOK 2 billion between July and September, up more than five percent over the same period last year.
Operating profit before tax and amortization (EBITDA) was NOK 430 million, compared to NOK 407 million in the third quarter of last year.
– Christmas shopping started this week, we are well prepared and have full stocks, the message was to the Europris manager.
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