By Richa Naidu and Aishwarya Venugopal

CHICAGO, (Reuters) – Early holiday sales are expected to be boosted by pent-up demand this year. However big discounters Walmart (NYSE) and Target Margins may continue to fall for (NYSE:) as the rising costs of labor, warehousing, and ocean/land freight pose a threat to Grinch.

Investors have put tremendous pressure on retailers to manage costs in the face of uncertainty caused by the pandemic. In recent months, US supply chains have been ravaged by shipping delays, closed factories in China, Vietnam and scarcity of raw material. Companies are scrambling for enough products to meet the critical holiday season.

According to data from Refinitiv, Target’s costs for goods and general advertising will rise by 10% in the third quarter. Walmart’s operating expenses, however, are forecast to increase nearly 4% to $28.57 trillion.

Walmart, the world’s biggest retailer, will report earnings on Tuesday, while Target is scheduled to post results on Wednesday.

Amazon.com, an e-commerce company (NASDAQ:), said late last month that it expected holiday costs to exceed $4 billion due to higher wages and operational disruptions that reduce the company’s online sales.

“It’s one marketplace for customers, labor and freight. Greg Melich from Evercore said, “We believe that the majority will be prudent in guiding fourth-quarter profitability even with sales healthy.”

WAGES, RISING RENTS

According to real estate trusts, industry warehouse rents will rise by 18-19% in the coming year. Prologis (NYSE:), which has customers such as Walmart, Amazon, and Target. For the full year, analysts expect Walmart’s rent expenses to rise 7% to $3.28 billion, according to Refinitiv.

“Importers of clothing and footwear are paying essentially double what they were paying for transportation before the pandemic,” according to Jason Miller, associate professor of supply chain management at Michigan State University’s Eli Broad College of Business.

Miller, who analysed data from USA Trade Online (maintained by the Census Bureau) found that insurance and freight cost rose to 6.4% of import product value in September 2021, as compared to 3.7% in September 2019.

As retailers seek to meet growing demand for their products, logistics expenses will rise. Mark Manduca (chief investment officer at GXO), who works with clients such as Apple (NASDAQ):), says that logistic costs have also risen. Nike (NYSE:) and Abercrombie & Fitch.

A competitive labor environment has led to higher wages across the nation.

Experts and analysts agree that larger retailers are more able to manage supply chain problems and transfer higher prices on to buyers.

Joe Feldman, a Telsey Group analyst said that while everyone is facing increased expenses, Walmart has an efficient supply chain which should allow them to have a great holiday season, despite all of the costs.

One forecast predicts that holiday sales in the United States could increase by as high as 10% to $859 billion.