Shares of Costco fell slightly on Thursday, despite the warehouse club posting quarterly earnings and revenue that topped estimates and reporting 8% year-over-year sales gains.
As tariffs raise economic worries, and potentially consumer prices, Costco could stand to benefit.
Some retailers have already warned that higher tariffs will mean higher prices.
And Walmart CFO John David Rainey warned earlier this month that higher prices were coming to the discounter’s stores and website in late May or June.
It has rerouted goods from countries with higher tariffs to non-U.S. markets.
Costco’s stock dropped a little on Thursday, even though the warehouse club reported 8 percent year-over-year sales increases and quarterly earnings and revenue that exceeded forecasts.
Costco doesn’t offer an annual outlook, in contrast to many other retailers. However, during an earnings call, the company’s executives discussed the difficulties and increased expenses that tariffs have caused for their operations.
According to a survey of analysts conducted by LSEG, the warehouse club retailer’s fiscal third quarter performance was in line with what Wall Street had anticipated.
Profit per share: $4.28 compared to… $4:24 is anticipated.
Revenue: $63.21 billion as opposed to… Anticipated is $63.19 billion.
In the three months ending May 11, Costco’s net income increased to $1.90 billion, or $4.28 per share, from $1.68 billion, or $3.78, in the same period last year. Compared to the same period last year, revenue increased from $58.52 billion.
E-commerce sales increased by almost 16 percent compared to the same period last year, excluding the effects of foreign exchange fluctuations and gas. Comparable sales, an industry metric that eliminates one-time factors like store openings and closures, increased by 8 percent.
As economic concerns and consumer prices rise due to tariffs, Costco may benefit. Because the warehouse club is renowned for its affordable prices and bulk discounts, an unpredictable tariff policy may attract more members and encourage them to renew their membership. In addition, its clubs provide cheaper groceries and gas, which continue to drive traffic even when customers cut back on their spending. Furthermore, Costco’s size gives it more negotiating leverage with suppliers over prices than some other retailers.
roughly one-third of Costco’s U. S. . CFO Gary Millerchip stated during the company’s earnings call that sales are goods imported from other nations. He claimed that roughly 8% of all US sales are made up of goods imported from China.
Higher tariffs will result in higher prices, as some retailers have already warned. Corie Barry, the CEO of Best Buy, stated on Thursday that the company has already increased the cost of certain consumer electronics due to tariffs. cosmetics business E. l. F. Last week, Beauty revealed a price increase for its makeup. Additionally, earlier this month, Walmart CFO John David Rainey issued a warning that in late May or early June, the discount retailer’s stores and website would see price increases.
CEO Ron Vachris stated during the company’s earnings call that Costco has searched for methods to lower tariff expenses while maintaining low prices. “Its buyers rushed orders to get them to the U,” he said. S. . before tariffs. Goods from nations with higher tariffs have been diverted to non-U.S. A. markets. Additionally, it has expanded the range of products it sources for Kirkland Signature, its private brand, in the nations or areas where they are sold.
In comparison to other stores, Costco offers a more limited selection of products, such as fewer brands of diapers or peanut butter. According to Millerchip, Costco can negotiate prices more closely with suppliers because it is a larger buyer thanks to its limited approach. If necessary, Costco can switch to different products, he added.
Costco has sometimes increased prices and other times absorbed tariff-related cost discrepancies, Millerchip said. Because pineapples and bananas from Central and South America are essential products for consumers, the retailer, for instance, chose to maintain price stability, he said.
By working with our suppliers, finding efficiencies, and acknowledging that there might be a margin impact, we felt it was crucial to truly eliminate the impact there for the member, he said.
Conversely, he stated that it chose to raise the cost of flowers from South America and Central America because they are more costly.
Shares of Costco have increased by roughly 10% this year as of Thursday’s close. That has surpassed the SandP 500’s gains of less than 1 percent over the same time frame.
