Costco sees excessive inflation affecting quite a few client merchandise

A butcher displays a display case of steak packages in 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 said it saw prices rise on a number of products over the past month, including shipping containers, aluminum foil and a 20% increase in meat prices.

“Inflation factors abound,” said CFO Richard Galanti on Thursday’s conference call on the company’s third quarter results.

“These include higher labor costs, higher freight costs, higher transport demand as well as container shortages and port delays … increased demand in various product categories, some bottlenecks, various shortages from chips to oil to chemical supplies through Gulf-affected plants, frosts and storms and in some cases higher raw material prices” , he added.

Costco reported earnings of $ 2.75 per share for the period, well above Wall Street estimates. It also recorded $ 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 plus side, there was a boost from gas inflation as gas 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 believes there may be some pressure on margins, although the level remains to be seen and there has been no significant impact so far.

Economists view the current wave of inflation – a closely tracked metric released on Friday estimated the annual pace at 3.1% – as largely transitory. They list many of the same factors as Costco executives do, 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 clothing items there were price increases of 3 to 10%.

Overall, he said the company rose from 1% to 1.5% inflation 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. “We think again that we did pretty well controlling that as much as possible, but inflationary pressures are in abundance.”

Costco has worked with its deliveries to get price pressures under control. But Galanti admitted that “some of [inflation] went through. “

Going forward, items like the camp’s $ 4.99 fried chicken and the $ 2.99 pack of 40 water could be affected.

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