Costco Sees Inflation Affecting Many Facets of Business

The big-box chain store Costco is seeing many areas where prices are increasing due to rising inflation. From aluminum foil to shipping containers, the chain store has seen a 20% increase in meat prices over the past month.  

The company’s CFO Richard Galanti said, according to CNBC, that there are “inflationary factors abound,” adding, “These include higher labor costs, higher freight costs, higher transportation demand, along with the container shortage and port delays … increased demand in various product categories some shortages, various shortages of everything from chips to oils and chemical supplies by facilities hit by the Gulf freeze and storms and, in some cases, higher commodity prices.”

However, Costco did report a profit of $2.75 a share, blowing past Wall Street estimates. It also beat Wall Street estimates netting $45.3 in revenue, well past its expected $43.6 billion.

Still, the numbers underneath tell a different story, leading to a domino effect of price increases across the board.

Like its competitors, Costco struggled to pass its increased costs on to customers. The company, while expecting some margin pressures, hasn’t seen any significant impacts from the market.

Many economists and those on Wall Street see the trend of inflation going many ways. According to CNBC, some economists believe the annual pace of inflation at 3.1% only to be temporary. Michael Burry, who Christian Bale portrayed in the film the “Big Short,” tweeted earlier this year that the high yield printing of the U.S. dollar could lead to a hyperinflation scenario.

Galanti cited prices from goods including pulp and paper, an assortment of plastic products, and soda and cheese, rising to as high as 8%. Even the prices of some apparel items rose anywhere from 3% to 10%.

The company has stated it has seen increases in prices from 1% to 1.5% range in March to 2.5% to 3% today.

“Some items are up more and some items, the sale prices haven’t yet changed. And some items are even down a little bit. We think, again, we’ve done pretty well in terms of controlling that as best as we can, but the inflation pressures abound,” Galanti said.

Galanti said Costco has worked with supplies to keep prices tamped down but conceded that “some of [inflation] has passed through.”