ISSAQUAH, Wash. — Costco Wholesale Corp. here said Wednesday it experienced 3% inflation in fresh foods during the recently ended fiscal first quarter, and expects inflation to rise to the 5% to 10% level in the next few months.
Sales of fresh foods were up in the high single digits for the 12-week quarter, which ended Nov. 21, with higher-end beef items like steaks and roasts reflecting the most inflationary pressures and poultry reflecting no pressure, "though inflation is coming," Richard Galanti, executive vice president and chief financial officer, told analysts during a conference call.
Inflation was running at less than 1% in candy, deli and refrigerated items, he noted; and despite inflationary pressures on fresh baked goods, Costco is holding prices steady, with the result that margins are down, Galanti added.
Net income for the quarter rose 17.3% to $312 million, while sales increased 11.2% to $18.8 billion. Comparable-store sales excluding gas and the impact of foreign currencies rose 5% overall, with comps up 4% in the U.S. and 10% among international locations.
Financial results include sales from the company's 50% ownership stake in a joint venture in Mexico, which are being consolidated for the first time in reported results and in comparisons with prior periods, the company said.