Inflation Impacts Costco Quickly

ISSAQUAH, Wash. — Costco Wholesale Corp. here said Wednesday inflation may be affecting its operations a little sooner than it impacts other retail outlets because its locations turn inventory faster.

ISSAQUAH, Wash. — Costco Wholesale Corp. [3] here said Wednesday inflation may be affecting its operations a little sooner than it impacts other retail outlets because its locations turn inventory faster.

However, the company continues to take advantage of manufacturer deals prior to price increases, Richard Galanti, executive vice president and chief financial officer, said. “Then we hold the price for a few weeks and benefit on the tail end to cover our costs.”

Speaking with analysts during a conference call to discuss financial results, Galanti said another round of price increase announcements are due next week, “and we will probably get hit first. But it is what it is, and we're fighting to delay passing the increases on and to sell as much at the old price as we can.”

Net income for the 12-week third quarter that ended May 8 rose 5.9% to $324 million, while sales increased 16.1% to $20.2 billion. Comparable-store sales, excluding gasoline, were up 7%. For the 36-week period, net income climbed 13% to $984 million, with sales up 12.9% to $59.5 billion and comps, excluding gas, up 6%.

Average transaction counts for the quarter were up nearly 7% and frequency was up nearly 5%, Galanti said, “due to our continued focus on food and sundries, fresh foods and gasoline.” Sales in every subcategory within food and sundries, except for tobacco, showed positive increases ranging from 5% to 16%, he added, while fresh foods sales were running in the low-double-digit range.