Costco Concerned by Rising Costs

By Alan Wolf, YSN

Economists may dismiss recent price increases as temporary aftereffects of the pandemic, but Costco, the nation’s No. 1 wholesale club, is starting to sound the inflationary alarm.

“Inflationary factors abound,” said Richard Galanti, the retailer’s CFO, during a third-quarter earnings call with analysts last week.

Galanti cited a litany of pricing pressures, including the higher costs of labor, freight and commodities, all compounded by continuing port delays and shortages of everything from shipping containers to chemical supplies — the latter in the wake of last February’s Gulf Coast freeze.

See: Container Shortage Adds to Inventory Woes

The CFO said the inflation rate has risen from upwards of 1.5 percent in March to as much as 3.5 percent currently, and that prices for some items have increased as much as 8 percent to 10 percent. Costco has been working with suppliers to help keep a lid on prices, he said during the earnings call, but anticipates some margin pressure and has been forced to pass along some cost increases to consumers.

“We think we’ve done pretty well in terms of controlling that as best we can, but the inflation pressures abound,” Galanti told analysts.

YSN contributor and longtime Whirlpool exec Joe Higgins similarly expressed inflationary concerns, specifically over the Consumer Price Index (CPI), which jumped 4.2 percent in April. “An increase of this magnitude in the CPI reduces net disposable income as the price of food, gasoline, homes, automobiles, furniture and appliances all rise at an alarming rate,” he observed in his latest YSN column.

Higgins warned that panic buying would trigger “a persistent and sustained level of inflation that even the Federal Reserve will have a hard time controlling.” But short of that, he is confident that consumer spending will continue to grow, even in the face of higher prices, due to some $2.3 trillion in savings that Americans tucked away during the pandemic.

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