Houthi Attacks Might Make American Kids’ Teddy Bears More Expensive

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Will Kessler Contributor
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Houthi rebel attacks in the Red Sea have increased international shipping costs for companies like Build-A-Bear, leading the company to consider raising prices for consumers, according to The Wall Street Journal.

Toy retailer Build-A-Bear is considering selectively raising prices due to continued elevated shipping expenses after trying to absorb the costs since the conflict in the region first began, according to the WSJ. Iran-backed Houthi rebels from Yemen are behind the attacks on commercial shipping through the popular trade route in the Red Sea, so far sinking 50 ships since the attacks began in November. (RELATED: ‘You Need To Check Yourself’: Fed Chair Warns Not To Dismiss Recent High Inflation Reports)

“We are seeing some elevated costs; we don’t believe that’s going to be there in perpetuity, but for the foreseeable future,” said Voin Todorovic, chief financial officer of Build-A-Bear, according to the WSJ.

Costs for shipping in the Red Sea are seeing upward pressure from increased travel times as companies reroute around the troubled area, adding time and extra expenses. Additionally, the need for and price of specialty war risk insurance have increased dramatically.

The disruptions have pushed up shipping rates across the world, not just through the Red Sea, with the cost of shipping a container from China to the U.S. through the Pacific jumping by 163% since November as of March 15, according to the WSJ. So far, many companies have tried to absorb the costs instead of passing the expenses down to cash-strapped consumers.

Companies like Build-A-Bear have been hit particularly hard by recent inflation, making price hikes more difficult as consumers pull back from buying non-essentials like toys for kids, according to the WSJ. Mattel, Dick’s Sporting Goods, Gap and Colgate-Palmolive have noted in recent weeks that they are also monitoring the situation in the Red Sea for cost changes.

Many companies have been wary of raising prices on consumers as inflation continues to run hot under President Joe Biden, with many resorting to shrinking product sizes instead as costs rise so as to not dissuade shoppers. Inflation remains elevated, most recently measuring 3.2% in February, far higher than the Federal Reserve’s 2% target.

“As long as the conflict continues, the rates have to stay inflated,” Ian Arroyo, chief strategy officer at Freightos, told the WSJ. “And it doesn’t look like it’s going to be resolved any time soon.”

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