For Walmart and Target, location matters – especially when it comes to transportation costs.
is getting hurt – by where their stores are clustered. High oil prices - $117 for a barrel of benchmark U.S. crude on Thursday - impose extra costs everywhere, but the impact varies wildly by state. The per-gallon price for diesel fuel that powers highway transport was 29% more expensive in the priciest state than the lowest-cost state, according to AAA data on May 20.
Walmart, known for having the best logistics operations among major U.S. retailers, shocked investors during its May 17 earnings call when Chief Executive Doug McMillon said the rapid run-up in oil prices resulted in first-quarter fuel costs that were $160 million higher than expected.The next day, Target Chief Operating Officer John Mulligan gave the market a bigger jolt on the company's earnings call by adding $1 billion to its transportation and freight cost forecast for 2022.
Walmart shares have largely recovered since the company's CEO flagged the surprise fuel cost hit, while Target shares are still down more than 25%. California, Target's No. 1 market with 16% of its 1,921 stores, had the nation's highest average per-gallon fuel prices as of May 20. California's stricter environmental rules and high taxes on motor fuel are among the drivers of its above-average prices. Per-gallon fuel prices are sharply lower in Texas, Walmart's top market. Of Walmart's 5,300 locations - including Sam's Club operations - in U.S. states, more than 11% are in Texas.
Pandemic-weary consumers are already cutting spending on goods like flat-screen televisions and furniture as they shift dollars toward travel and entertainment.
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