Comment / Shipper radar: We put a value on Costco's charters but don't forget the consumer

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• John Snow

  October 06, 2021 at 1:19 pm

  Great work here! I believe, though, that shipping costs are booked to Merchandise Costs (COGS) on the income statement instead of capex on the cash flow statement at Costco. In FY21, Merchandise Costs were $170.7 billion, so $100 million as a percentage of that is even more irrelevant!

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  • Alessandro Pasetti

    October 06, 2021 at 1:45 pm

    Hi John,

    Many thanks for the feedback, it also helps explain why we specifically referenced capex as well as other cash outflow items (acquisitions, dividends), rather than COGS, knowing that COGS was a massive number. We probably should have said that.

    Certainly they aren’t capex and we didn’t mean to suggest that – yes, it’s COGS, as you said, although merchandise expenses are all grouped under “operating costs”, so there may be a non-COGS component too in those charters. Also to say, we wanted to show that tiny cost “investment” against all different capital allocation levers… essentially the added cost budgeted for the charters is irrelevant and doesn’t affect cash flows, that was the purpose of the exercise.

    In other words, should this situation become permanent, its capital allocation will very unlikely be affected, unless we believe it could charter a significantly larger number of vessels of that kind.

    Hope it helps.

    Best regards,

    Ale

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