U.S. businesses as a whole have had to deal with higher costs due to supply chain disruptions, exacerbated by new COVID-19 lockdowns in China and the Russia-Ukraine war.
Costco said it was raising prices in some grocery areas to fight inflation.
Retailers like Walmart Inc. and Target Corp. warned that decades-high inflation is hurting their profits as customers refrain from buying non-essential, high-margin products.
Still, Costco managed to post quarterly profits and revenue that far exceeded estimates, as the warehouse club operator’s average customer earns more than a typical Walmart and Target customer.
The company’s efforts to keep gas prices several cents below the national average also boosted memberships and sales.
Unlike Walmart, Costco said there hasn’t been much switching from branded products to its private label products, Kirkland Signature.
“We’re not really seeing a drop in sales. We’re seeing a little change in where people are spending their money…this year it’s more ticket sales, restaurants, travel, tires and gasoline,” Robert Nelson, senior vice president of finance and investor relations, said in a conference call after the results.
In the third quarter, Costco’s gross margins fell 99 basis points.
Costco’s total revenue rose 16% to $52.60 billion in the quarter ended May 8, compared to estimates of $51.71 billion, according to IBES data from Refinitiv.
Excluding items, Costco earned $3.17 per share, beating estimates of $3.03.