Costco Working To Keep Prices Down For Customers As Free Samples Return

Costco (COST) is the latest retailer to warn of higher costs that it is facing, but the company has yet to announce any price increases for its wholesale club members.

The company issued the warning on Thursday alongside its third-quarter earnings, where it reported $42.28 billion in revenue, up nearly 22% from the same period last year.

Costco is seeing higher costs on paper goods, apparel, plastics used for paper plates and cups, plants, fresh meats, and imported cheese as the space for containers and shipping comes at a premium, Richard Galanti, Costco finance chief, said, according to The Wall Street Journal.

Chips, oils, and chemicals are also being hit by higher costs due to the Gulf freeze and storms, Galanti said, according to Fox News.

"Despite these issues, we continue to work to mitigate cost increases and supply chain delays in a variety of different ways as best we can," Galanti said, Fox News reported. "The biggest way we've handled supply chain delays is adjusted ordering and front-loading, if you will, orders of many items that we think we've got that pretty well under control."

Galanti continued by saying that Costco had estimated that inflation costs had risen in the 1 to 1.5% range back in March, but now the company thinks it is up 2.5% to 3.5%, excluding the price of gasoline, which could squeeze Costco’s margins going forward.

During the earnings call, Galanti told investors, as reported by the WSJ, that Costco is working to control costs and manage the supply chain push back by working to secure inventory early.

Upon the news of the cost crunch, Costco said that it has plans in the works to open 21 new warehouse locations during fiscal 2021, and 25 wholesale stores for each of the next two years following that, including a store in China, Galanti said, according to the WSJ.

Costco has a total of 809 warehouses, including 559 in the U.S. and P uerto Rico.

Costco’s Q3 earnings report also included a net profit of $1.22 billion, up $838 million from Q3 2020.

The retailer memberships also reached 60.6 million members for the quarter, up from 59.7 million 12 weeks earlier, Fox News said.

Also new at Costco is the revival of its beloved food courts and free samples, which will come back early next month as it eases its COVID restrictions, CNN reported. About 170 locations will begin offering samples the first week of June, with the remaining stores offering them at the end of the month, the news outlet said.

Sampling will change, however, including plexiglass shields, smaller batches of samples, and distribution of samples to one customer at a time, Galanti said during the earnings call as reported by CNN.

Costco also dropped its face mask policy for vaccinated shoppers after being one of the first, if not the first, retailers to implement a face-covering requirement for customers in its stores in accordance to new guidelines from the Centers for Disease Control and Prevention for vaccinated Americans.

Shares of Costco were trading at $385.30 as of premarket hours on Friday, down $2.20, or 0.57%.