Price pressure is increasing? Costco’s finance chief reveals inflation ‘abounds’

Costco (Costco), a large chain of warehouse stores, said the past month, including containers, aluminum foil and a range of products, including prices are rising, meat is up 20%.

Costco Treasurer Galanti (Richard Galanti) said in the company’s fiscal 3Q earnings conference call, “Inflation has emerged. Higher labor costs, higher freight costs, higher transportation demand, and container shortages and port delays have pushed up demand in a variety of product categories as Bay Area port congestion and storm impacts have left shortages of everything from chips to oil and chemical supplies; and at the same time, commodity prices have moved higher.”

Costco earned $2.75 per share last quarter, well above Wall Street expectations. Revenue came in at $45.3 billion, also beating estimates of $43.6 billion.

Underneath those numbers, however, is the current situation where rising prices across the board are affecting the chain.

On the bright side, gasoline prices have gone up; they’ve soared about 30% nationwide this year. But on the other side, things aren’t so simple.

Like other companies, Costco has been working hard not to pass costs on to customers. This is expected to affect profitability somewhat, but the extent remains to be seen, and so far there hasn’t been any significant impact.

Galanti mentioned price increases of up to 8 percent for certain commodities, including pulp and paper, as well as various plastic products and sparkling water and cheese. Prices for certain apparel categories rose 3 to 10 percent.

Overall, he said, the company’s estimate of inflation has risen from 1 percent to 1.5 percent in March to 2.5 percent to 3.5 percent today.

Galanti said, “Some commodities have gone up more, some haven’t changed. Some have even gone down a little bit.” “While we still think we’re doing a good job of doing our best to control prices, inflationary pressures have rebounded.”

Costco has worked with its suppliers to address price pressures. But Galanti acknowledged that “some of the inflation has already started to be passed on.”

He said items such as $4.99 roast chicken and $2.99 packages of 40 bottles of drinking water may be affected by future pointers.