Good morning,

US retailers are facing another increase in the cost of moving goods as fuel surcharges rise across trucking, parcel and ocean shipping. The increases come as the war in Iran pushes fuel costs higher, adding pressure on retailers already dealing with elevated transportation expenses.

For retailers, the impact is particularly visible in parcel delivery. UPS and FedEx now apply fuel surcharges of 24.25% and 23.75%, respectively, up sharply from UPS’s roughly 9% surcharge in 2021. Ocean shippers are also facing higher costs, with container fuel surcharges rising as much as 75% this year.

Let’s dive into today’s edition.

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Walmart is investing about $1.3 billion to build a 1.5 million-square-foot automated fulfillment center in Carnesville, Georgia, expanding its network of next-generation facilities supporting ecommerce deliveries. Construction is expected to begin later this year, and the facility will employ about 1,000 workers. It will be Walmart’s sixth next-generation automated fulfillment center.

Big Picture: The expansion comes as Walmart increases its reliance on automation to handle ecommerce orders. The retailer said more than 50% of its ecommerce fulfillment volume is already processed through automated facilities. Its existing next-generation centers can reach 75% of the US population with next- or two-day delivery, helping Walmart move inventory closer to customers and speed up order fulfillment.

High-Tech Centers: The facilities use conveyors, shuttles, scanners, and other automated systems to reduce fulfillment from 12 steps to five, while increasing productivity by about 50%, according to technology partner Knapp. Walmart is also pushing faster delivery, having expanded 30-minute delivery to 38 US markets as it builds out capacity for groceries and other household essentials.

Amazon is asking some third-party sellers using Fulfillment by Amazon to bid for access to its “Sub Same-Day” delivery service, which can get orders to customers in as little as two hours.

Another Cost: Under the new system, sellers choose how much they are willing to pay per unit that actually ships via Sub Same-Day, with Amazon evaluating bids based in part on customer feedback. The move gives sellers more control over which products receive the fastest delivery, but also adds another cost and strategic decision to selling through FBA.

The service is available in 2,300 metro areas, and Amazon says products offered through it have generated 12% higher sales on average than those offered through regular FBA.

Big Picture: The push for faster delivery also has logistics implications for sellers. To meet shorter delivery windows, sellers may need to place inventory in more Amazon facilities closer to customers, increasing inventory and warehousing costs. Amazon is expanding ultrafast delivery, including 30-minute delivery in some cities, but its Sub Same-Day facilities currently stock about 100,000 products, far fewer than its traditional fulfillment centers.

Dollar General and Dollar Tree beat quarterly sales expectations as consumers facing higher gas and food prices increasingly turned to cheaper groceries and everyday essentials.

What’s Happening? Dollar General’s same-store sales rose 3.5%, prompting the retailer to raise its full-year sales-growth forecast, while Dollar Tree recorded its first increase in average customer traffic in four quarters.

Dollar General said customers are making fewer trips and shopping closer to home, benefiting stores located within local communities. The retailer is also expanding its general-merchandise offering as shoppers look for lower-priced apparel, home goods and toys, although both companies warned that higher fuel costs could pressure margins in the second half of the year.

Future Outlook: The results highlight a widening split in US consumer spending, with lower-income shoppers trading down and delaying discretionary purchases while higher-income households continue spending on nonessential goods.

Tariff refunds are also supporting the retailers’ profits: Dollar General expects about a 25-cent-per-share benefit, while Dollar Tree expects roughly 60 cents, after accounting for related reinvestments.

Shein is looking to acquire more fashion brands and plug them into its China-based supply chain as its own-brand business loses some of the growth momentum that made it a fast-fashion powerhouse.

Key Details: Founder and CEO Sky Xu told investors that Shein wants to use its rapid manufacturing and supply-chain network to help other brands increase sales and margins.

The strategy would move Shein beyond simply selling its own clothes toward becoming a backend supply-chain platform for fashion brands. The company describes the ambition as becoming the “Amazon Web Services of the fashion industry,” using a network of more than 7,500 manufacturers, designers, merchants and other partners to handle production while acquired brands retain their design and marketing operations.

Big Picture: Shein has already acquired Everlane for about $80 million, although the deal is facing a US national-security review. The pivot comes as trade barriers in the US and Europe raise costs for Shein’s direct-to-consumer model and sales growth slows.

Kroger has partnered with Instacart to offer grocery and eligible prescription deliveries in a single order, bringing the two services together across almost all Kroger-owned banners, including Fred Meyer, Ralphs and Harris Teeter.

What’s Happening? The service connects customers to more than 2,200 Kroger pharmacy locations through Instacart’s delivery network.

Under the new model, Kroger pharmacy staff fill and verify prescriptions before handing them to an Instacart shopper, who delivers them alongside the customer’s groceries. Customers must have their My Prescriptions account linked through Kroger’s website or app to use the service.

What’s Next? The partnership expands Instacart’s role in Kroger’s delivery operations while giving customers a single delivery for two types of purchases. The move comes as both companies continue to invest in their logistics and technology capabilities: Kroger agreed last month to acquire Giant Eagle for $1.65 billion, while Instacart acquired computer vision company Arpalus to improve inventory accuracy across its e-commerce and in-store operations.

Retailers are scaling back their plus-size clothing offerings as the growing use of GLP-1 weight-loss drugs changes consumer demand.

Key Details: H&M has removed women’s 3XL and 4XL sizes after saying demand was weaker, while data from Edited shows declines in larger-size offerings at Aritzia, Mango and Zara. Retailers have generally avoided directly tying the changes to GLP-1 drugs, instead describing them as business optimization.

The shift comes as GLP-1 use has surged, with about 21% of US households estimated to include a user. That is changing how retailers think about inventory: larger sizes typically sell more slowly and cost more to produce because they require more fabric. For some brands, that makes extended sizing an increasingly difficult proposition as they focus on margins and changing demand.

Size Issues: The impact is extending beyond major apparel chains to specialist plus-size retailers, with Torrid closing more than 170 stores and Destination XL reporting an 8% decline in comparable sales in fiscal 2025.

Target is rolling out its own Target Beauty Studio after its four-year partnership with Ulta Beauty officially ended on Aug. 16. The companies had announced in August 2025 that they would not renew the partnership when it expired this year, paving the way for Target to launch its own beauty offering.

New Concept: Target announced the new concept on Aug. 26, with the Beauty Studio set to launch in more than 600 stores and online in September. The new Beauty Studio will feature more than 1,600 products across skincare, haircare, cosmetics, and fragrances, from 90 prestige, emerging, and global brands.

Most of the brands will be new to Target, including BondiBoost, Coach, Joico, Kenra, Paul Mitchell, and Mario Badescu. The concept will initially roll out at five South Carolina stores, with the first locations opening Sept. 26.

What’s Next: The retailer is positioning the new format as the next stage of its beauty strategy, offering a broader selection of brands and products through its own retail operation.

Best Buy reported stronger-than-expected fiscal second-quarter results and raised its full-year outlook as signs of progress in its turnaround emerged.

Key Details: Comparable sales rose 4.1%, well above the 1% growth previously expected, while revenue increased 3.6% to $9.78 billion. Computing was a major contributor to the stronger performance.

What’s Next: The retailer now expects full-year revenue of $42.3 billion to $42.8 billion, up from its previous forecast of $41.2 billion to $42.1 billion. It also raised its comparable-sales outlook to 1.9% to 3%, while adjusted earnings per share are now expected at $6.70 to $6.90. Best Buy said customers remain willing to spend but continue to prioritize value and promotions.

Big Picture: Despite the strong quarter, shares fell about 7%. Investors were weighing the quality of the earnings improvement, including a $34 million benefit from tariff refunds, as Best Buy also faces higher computing prices and rising memory-chip costs.

The company said it is adjusting its product assortment to meet customers at different price points while continuing to navigate tariffs and other industry pressures.