Costco sees inflation in abundance affecting plenty of client merchandise
A butcher stores a display case of steaks at a Costco store in Novato, California on May 24, 2021.
Justin Sullivan | Getty Images
Don’t tell Costco executives that inflation is low.
The big box club chain announced that prices for a number of products, including shipping containers, aluminum foil, and a 20% increase in meat prices over the past month, have increased.
“Inflation factors abound,” said CFO Richard Galanti in the company’s earnings forecast for the third quarter on Thursday.
“These include higher labor costs, higher freight costs, higher transport demand as well as the shortage of containers and delays in the port … increased demand in various product categories, some bottlenecks, various bottlenecks from chips to oils to chemical supplies by facilities affected by the Gulf Frost and Storms and in some cases higher commodity prices, “he added.
Costco reported earnings of $ 2.75 per share for the period, well above Wall Street estimates. It also generated $ 45.3 billion in revenue, which also topped the road that looked for $ 43.6 billion.
However, beneath those numbers was a story about how higher prices across the board affected the chain.
On the upside, gas inflation spiked as pump prices rose about 30% across the country this year. In other cases it wasn’t that easy.
Like other companies, Costco struggled to pass the cost on to customers. The company assumes that there could be some margin pressure, although the degree remains to be seen and no material impact has occurred so far.
Economists view the current rate of inflation – a closely tracked measure released Friday – as temporary. They list many of the same factors as the Costco executives, mainly a series of supply chain issues that have led to a surge in products central to the US economy and household consumption.
Galanti cited price increases of up to 8% and cited goods such as pulp and paper, an assortment of plastic products, and soda and cheese. For some clothes, prices rose by 3% to 10%.
Overall, he said the company cut inflation from 1% to 1.5% in March to 2.5% to 3.5% today.
“Some items are higher and some items, the retail prices haven’t changed. And some items have even gone down a little,” said Galanti. “Again we think we’ve done pretty well to control this as best we can, but the inflationary pressures are great.”
Costco has worked with its supplies to keep price pressures under control. But Galanti admitted that “some of [inflation] went through. “
Going forward, items like the warehouse’s $ 4.99 fried chicken and the $ 2.99 40-pack water container could be affected.