Here’s what Costco is saying about inflation — and a membership fee increase

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As the market watches about inflation and what will cause the Fed to turn off the gas pedal, it’s worth considering what some companies are saying about it.

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The scene at Costco Wholesale, a warehouse retailer known for its competitive prices, looks as good as it gets to begin with. And comments made by CFO Richard Galanti on his conference call suggest the Fed will still be in a position to fight inflation for the rest of the year, although perhaps a pivot could come next year.

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According to a transcript of the call from S&P Global Market Intelligence, “We have seen modest improvement in some areas,” Galanti said. “But all in all, the pressure from higher commodity prices, higher wages and higher transportation costs and supply chain disruptions – they still exist, but we are just seeing a little light at the end of the tunnel.”

For the fiscal fourth quarter ended Aug. 28, Costco absorbed inflation of about 8%, compared to 7%-plus in the previous quarter.

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“We are seeing commodities – prices of some commodities coming down, like gas, steel, beef, relative to a year ago, even some small cost changes in plastics. We look at container pricing. Some are seeing relief. Wages are still high when we talk to our suppliers. And as we all know, wages are still a thing that’s still relatively high. But overall, there’s no way around that tunnel. Finally the beginning of some light,” said Galanti.

The supply chain was getting a little better, Galanti noted, noting a drop in spot container prices. “And then you will hopefully start to see it in some of the other contracts as they continue. There are no major capacity problems or container shortages now,” he said. He said port delays have improved. He added an analyst One of the lessons the company learned was to try to spread deliveries across different ports.

Operators of 838 warehouses worldwide were asked when membership fees would increase. The last three hikes were done on average five years and seven months apart. That means, if Costco were to adhere to that timetable, there could be an increase in fees in January 2023. “Now I’m not suggesting that it’s January ’23. I’m just saying it’s not there yet,” Galanti said. “And our idea is, do we have confidence in our ability to do that? . And at some point, we will. But it is a question of when, if not of when.”

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It reported earnings and revenue ahead of Wall Street’s expectations late Thursday. But the stock slipped 3% in premarket trade, and is down 14% this year.

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