Costco sees shipping costs increase on imported fresh meats and cheeses
Costco CFO Richard Galanti warned about the company call for third quarter results that the retailer is facing “inflationary pressures” including higher labor costs, shortages of shipping containers and higher prices for some products shipped overseas.
According to Galanti, shipping costs have increased on imported fresh meats and cheeses, plastic products including cups and plates, some clothing and paper items. He also cited various shortages of products ranging from “shavings to oils and chemicals supplied by facilities affected by frost and Gulf storms”.
In March, Costco estimated inflation to rise from 1% to 1.5%, but now estimates inflation to be between 2.5% and 3.5%, excluding gasoline sales. According to Galanti, the turnaround time for shipping containers to reach the United States, deliver their contents and return to the United States port for re-entry overseas has doubled from approximately 25 days to 50 days.
“Despite these issues, we continue to work to mitigate cost increases and supply chain delays in different ways as best we can,” said Galanti. “The best way we’ve dealt with supply chain delays is to adjust orders and pre-load, if you will, orders for a lot of items that we think we’ve got pretty well under control.”
Inflation concerns aside, Costco has consistently posted double-digit quarterly net sales growth of 21.7% to $ 44.38 billion, from $ 36.45 billion a year ago. Net sales for the first 36 weeks of fiscal 2021 also saw double-digit gains of 17.7% to $ 130.61 billion, up 17.7% from $ 110.94 billion last year.
The retailer’s comparable sales in the United States were 18.2% for the third quarter and 14.7% for the first 36 weeks of fiscal 2021. Adjusted for gas and currency prices, comparable sales in the States United for the quarter and the first 36 weeks were about 15%. E-commerce comparable sales reached 41.2% for the quarter and 65.1% for the first 36 weeks, respectively. When adjusted, e-commerce comparable sales were 38.2% and 63.6%, respectively.
The Issaquah, Wash., Based company reported quarterly profit of $ 1.22 billion, or $ 2.75 per share, which included pre-tax of $ 57 million, or 0.09 dollar per share, in costs related to COVID-19, mainly due to the elimination of the $ 2 hourly bonus. Total revenue was $ 45.2 billion for the quarter, including $ 902 million in dues.
Total Costco member households reached 60.6 million at the end of the third quarter, up from 59.7 million households twelve weeks earlier, and paid executive members totaled 24.6 million, an increase of 817,000 compared to the previous twelve weeks.
Costco shares are down 0.8% after-hours trading after Thursday’s announcement.