Costco Chief Financial Officer Richard Galanti warned on the company’s third quarter earnings call that the retailer is seeing “inflationary pressures” including higher labor costs, shipping container shortages, and increased prices on select products shipped from overseas.
According to Galanti, shipping costs have increased on fresh meats and imported cheeses, plastic products including cups and plates, select apparel items and paper goods. He also cited various product shortages from “chips to oils and chemicals supplied by facilities hit by the Gulf freeze and storms.”
In March, Costco estimated inflation was rising in the 1% to 1.5% range, but now estimates inflation is in the 2.5% to 3.5% range, excluding gasoline sales. According to Galanti, the turnaround time for shipping containers to hit the U.S., deliver their contents and return back to the U.S. port to go back overseas doubled from approximately 25 days to 50 days.
“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. “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.”