Latest news with #Millerchip
Miami Herald
3 days ago
- Business
- Miami Herald
Costco defies tariff shifts with higher profit, lower prices
Costco Wholesale Corp. posted better-than-expected earnings in the third quarter, a sign that the nation's largest club chain is flexing its scale and devoted following to navigate tariffs and economic turbulence. The retailer said it generated earnings per share of $4.28 for the quarter ended May 11, above what Wall Street analysts were expecting. The metric suggests that Costco is maintaining profitability even as consumers prioritize necessities to save money. The shares rose 1.5% at 9:37 a.m. in New York trading Friday. Through Thursday's close, the stock had advanced 10% year to date, outpacing the S&P 500 Index. Costco is the latest big-box retailer to post quarterly results, as investors and analysts search for clues on how shoppers are spending. Many consumer-facing companies have posted soft results in recent weeks with Target Corp., Procter & Gamble Co. and Kraft Heinz Co. slashing their annual outlooks. Walmart Inc. and a handful of names have been outliers with strong results. Sweeping, on-again, off-again U.S. tariffs have upended operations across industries, fueling chaos among companies, investors and consumers. Courts are weighing in on whether these tariffs can stay in effect. "We are basing our decisions really based on what we know" and what's in place at the moment, Chief Financial Officer Gary Millerchip said in an interview, adding that Costco hasn't made changes in response to court orders this week as tariffs are still in effect. "It's difficult to make decisions on items that we just don't know what the outcome will be." At Costco, price increases are expected to hit later in the year as the company starts to sell new inventory. It won't be a "one-size-fits-all" scenario, Millerchip said. The retailer is likely to hold prices of some items steady and raise others. Costco may stop selling certain products if they become too expensive, and timing will also vary for items. In addition to working with suppliers, Costco is rerouting goods sourced from countries with high tariffs to other markets, Chief Executive Officer Ron Vachris said on a call with analysts Thursday. About a third of Costco's U.S. sales come from goods imported from other countries. In the U.S., it's sourcing more locally-produced mattresses, pillows and other items. The retailer also pulled forward some summer products such as sporting goods - an effort that helped Costco keep prices low. Amid tariff-driven cost increases, Costco is examining potential price changes on an item-by-item basis, executives said. For example, it held prices of pineapples and bananas - sourced from Central and South America - but raised those of other goods that are more discretionary. 'Full-force ahead' As commodity costs have dropped in recent months, Costco lowered prices of eggs, butter and other key staples. These deals, and expanding hours for gas services, helped its performance. Still, prices of non-food items rose in the low-single digits for the first time in a number of quarters due to imported goods, executives said. "It's full-force ahead on lowering prices where we can," Vachris said. Costco tends to be more resistant to economic volatilities because its customers skew more affluent and pay a fee to shop at its network of more than 800 stores. The company - known for its ever-changing assortment of mega-sized products - has been expanding its popular Kirkland brand and investing in its digital operations. Historically, it has sacrificed short-term profit margins to gain members, drive loyalty and grow business. The company's limited-assortment model and large scale also give it more flexibility on what it sells. Against the backdrop of tariffs, measures of U.S. consumer sentiment have deteriorated during most of the Trump administration on fears of an economic fallout. Spending has generally held up so far, though tariff-driven price increases are starting to hit store shelves. Many companies have signaled that they will be strategic and surgical about price increases, holding down costs of some items and discontinuing other products should they get too expensive. Overall, clothes, electronics and home goods are among the most vulnerable to levies. Costco, which reports monthly sales ahead of earnings, said its comparable sales excluding gas and currency fluctuations rose 8% during the latest quarter. E-commerce sales grew about 16% during the quarter. Traffic to website and stores also rose. Gold, toys and health and beauty items were among top sellers. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Business Insider
3 days ago
- Business
- Business Insider
Costco CEO explains how the chain kept prices low as tariffs and egg costs hit retailers hard
Shoppers have faced higher prices due to tariffs and bird flu this year. Costco, meanwhile, has worked to avoid price hikes on many items thanks to a multi-pronged approach, executives said during the retailer's third-quarter earnings call on Thursday. As the threat of tariffs became real during the quarter, which included President Donald Trump's " Liberation Day," Costco brought in some merchandise for summer earlier than usual and purchased more US-made inventory, CEO Ron Vachris said during the call. The chain also rerouted some goods it had already purchased for its US stores to its locations abroad in order to avoid paying the tariffs. Costco's buyers have looked at specific items to figure out whether it can source US-made alternatives to suddenly more-expensive imports, Vachris said. "Is it something that we can replace with something domestically here, or is it something that we need to go ahead and move on quickly and bring in prior to any future tariff increases?" he said. Higher costs for some grocery staples, namely butter and eggs, also provided a challenge for Costco over the last few months. Besides being common purchases for Costco customers, those two items have a large "halo effect" on the costs of other goods that require them as ingredients, Vachris said. Costco's buyers talk to vendors regularly about lowering costs, the CEO said. "We're watching pricing daily, and if not hourly, on every key commodity," Vachris said. That doesn't mean that Costco is raising prices for those items, though. In fact, the chain's profit margins on specific products have taken a hit. Often, when the price that a retailer pays for an item goes up, stores raise the price that consumers pay in part or in full to protect their profit. That's exactly what many retailers did earlier this year when the cost of eggs skyrocketed as bird flu killed many egg-laying chickens and drove supply down. Costco said it avoided raising prices on eggs and butter as its costs for those things went up — leading some customers to line up early. The wholesale warehouse chain cut egg prices by 10% and butter prices by about 7% during its third quarter, CFO Gary Millerchip said on an earnings call Thursday. The retailer also held back on price increases on items that use those ingredients, Millerchip said. One example: The croissants in Costco's in-store bakeries. The company "held prices lower when butter costs were elevated," he said. As butter prices have fallen, Costco's profit margin on that item has expanded, Millerchip said. "In general, we feel margin pressure during times of inflation on these types of ingredients as we keep prices low for our members," Millerchip said. "And the opposite is often true when prices fall, as we feel the margin relief faster while also being able to lower prices more quickly than our competitors."
Miami Herald
5 days ago
- Business
- Miami Herald
Costco shares surprising pricing news as tariff pressures increase
Most Americans have some fear over the state of the economy. Even though the job market has ostensibly been very strong, it has been challenging for many former high-earners to find new positions. When you see wide cuts at major technology companies, those a high-paying jobs being lost which may not be easy to replace. Related: Iconic retailer returns after 13 years to take on Amazon In addition, many Americans remain concerned over inflation and high prices. That's something that President Donald Trump's looming threats of tariffs has further exacerbated. Americans do seem to understand that tariffs will be paid by them, and not foreign countries. Some huge companies like Walmart and Costco will eat some of those costs and maybe be able to force their vendors to do the same. Despite that, prices are going to rise and that's something which has many Americans tightening their hold on their wallets. Don't miss the move: Subscribe to TheStreet's free daily newsletter You would think that major retailers would be worried about this - and many are - but Costco CFO Gary Millerchip has a very unique view of what's happening. His comments either speak to the trust Costco members have in the brand, or that many people are more confident in the economy than you may have been led to believe. Image source: VIEWpress/Getty Images While many Americans may be worried about the finances, Costco members have not acted any differently. "We're not really seeing any change in what we've seen around our members over the last really few quarters," Millerchip said during Costco's second-quarter earnings call. He does believe that members are putting more thought into their purchases. "We believe that the member is probably as much focused now on quality, value and newness as they have been for quite some time. But they are still showing that willingness to spend, but they're being very choiceful where they're spending their dollars," he added. More Retail: Walmart shares new service that's better than AmazonTarget CEO sounds alarm on customer behaviorNike delivers bad news for customers Millerchip believes that shoppers will become even more protective of their dollars. "And we think that's likely to continue and maybe even become more choiceful as the impact of some return of inflation and the potential impact of tariffs could flow through as well. I'd say we're also seeing a continued sign of what I mentioned last quarter, where there's some indication that members are spending a little bit more on food at home versus food away from home overall," he said. "When we talk about individual categories, I would say on nonfoods, again, I think you characterized it well for us. Our merchants have done a great job of really focusing on those three key themes that we hear from our members around bringing in great items at great quality and great value," Millerchip shared. He made it clear that the chain has not seen changing trends in big-ticket purchases. "And while there are examples of that with newness around things like gold and some of the large electronic and gaming items I mentioned, we're really seeing it being fairly broad-based across all the categories that I listed on the call earlier," he added."So generally, we're continuing to see strong trends overall in nonfoods. Not every category has been growing. "There are a couple of categories generally that have been flatter, I would say, over recent quarters, consumer electronics and apparel. We believe we're performing relatively well on those compared to the industry, but they are lower trends on those items than there would be in some of the other categories that I mentioned earlier. And we're seeing, as I mentioned in some of the prepared remarks, we continue to see great trends in fresh products overall' the CFO said. Related: Ross Stores makes drastic decision customers will see in stores Costco has also seen members indulge and look to save money. "We're still seeing really good growth on the more premium meat items, but we're seeing even faster unit growth, I would say, on some of the lower-cost cut items like ground beef and poultry and pork. So overall, I think the trends that we've seen, we're not really calling out anything significantly different," Millerchip added. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
18-05-2025
- Business
- Miami Herald
Costco quietly makes payment change members will love
Costco never adapts new technology quickly. The warehouse club lets its rivals be the innovators that push boundaries. Then, once a technology has been proven out, Costco (COST) consider whether it makes sense to add it. Related: Another sporting goods chain closing all locations, no bankruptcy It's a slow and steady approach that allows the company to embrace change without having to spend money on losing ventures. By the time Costco adds something new its value has been proven out elsewhere. That's why the chain was slow to offer direct sales on its website and why it still does not use robots or other gimmicks in its warehouses. If a technology has not become mainstream, it's very unlikely that Costco will use it. Innovation comes slowly for the membership-based warehouse club, but it does happen. That includes some recent changes that benefit members. Don't miss the move: Subscribe to TheStreet's free daily newsletter "We continue to make progress with our technology road map. The new warehouse tool in our app, which allows members to view local warehouse item availability and prices had over 43 million visits," CFO Gary Millerchip shared during the chain's second quarter earnings call. Image source: VIEWpress/Getty Images While Costco takes a slow and steady approach to digital transformation, it has been working to improve the overall customer experience. "We still have a lot of work to do in this area and are excited about the potential to improve the member experience through more relevant targeted messages and experiences," he added. The chain also recently gave members a new payment option. Costco has added Affirm as a pay-over-time option for some purchases. "Split large purchases into smaller payments Choose a monthly payment option from Affirm for your online orders of $500 or more," the warehouse club shared on its website. More Retail: Costco quietly plans to offer a convenient service for customersT-Mobile pulls the plug on generous offer, angering customersKellogg sounds alarm on unexpected shift in customer behavior Affirm allows users to pick their payment terms and how much interest they end up paying. It's a simple technology that many other retailers and travel service providers have already adopted. Costco does not have to explain how Affirm works to most members because they have already seen it (and maybe used it) elsewhere. The warehouse club shared the steps to use Affirm on its website: Add $500 or more of eligible products to your cartSelect Affirm as your payment method at checkout on a few pieces of information for an real-time decision. This won't affect your a payment plan: Pay in 3-36 monthly payments. Rates are between 10-36% APR. Millerchip also spoke about two other changes Costco made that its members will like. "And Costco Next, our curated marketplace also had record holiday sales. We are now approaching 100 vendor sites and significantly grew average order value in the quarter," he shared. The chain also made a change that directly impacts its members' bottom line. "Last quarter, we increased the reward on gas purchases at Costco locations to 5%," he added. Those changes have helped Costco continue to grow its sales. "Turning now to our February sales results for the four weeks ended this past Sunday, March 2nd, compared to the same four retail calendar weeks last year. Net sales for the month of February came in at $19.81 billion, an increase of 8.8% from $18.21 billion last year," Millerchip shared. Related: Walmart CEO has a harsh warning for customers The chain excelled at pretty much every metric it shared, except for international sales. "Comparable sales for the month were as follows: U.S. comparable sales were up 8.6%, both with and without gas deflation. Canada comp sales were up 3.2% or 8.7% adjusted for gas deflation and FX. Other international comp sales were down 0.6% or up 6.5% adjusted," he added. "This resulted in total company comp sales of 6.5% or 8.3% adjusted for gas deflation and FX." The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
09-05-2025
- Business
- Miami Herald
Costco quietly plans to offer a convenient service for customers
There is no doubt that Costco (COST) has rapidly expanded in popularity over the past few years, thanks to its products and deals consistently going viral on social media platforms such as TikTok. Even in the past few months, Costco has seen a significant boost in sales, despite last year's membership price hike and further cracking down on membership card sharing. Don't miss the move: Subscribe to TheStreet's free daily newsletter In its latest earnings report, Costco revealed that its comparable sales in the U.S. increased by 8.3% year-over-year during the second quarter of fiscal year 2025. This contributed to its earning a net income of $1.7 billion, which is 2% higher than what it earned during the same quarter a year ago. Related: Costco makes a major change to a convenient membership perk Despite a boost in sales, Costco Chief Financial Officer Gary Millerchip warned during an earnings call in March that Costco members are becoming more cautious about their spending amid concerns about the economy. "We believe that the member is probably as much focused now on quality, value, and newness as they have been for quite some time," said Millerchip. "They are still showing that willingness to spend, but they're being very choiceful where they're spending their dollars. And we think that's likely to continue and maybe even become more choiceful as the impact of some return of inflation and the potential impact of tariffs could flow through as well." As customers pull back their spending, Costco is planning to lean even more toward a controversial trend that can help it reverse recent shopper behavior. Costco has entered an online partnership with "buy now, pay later" company Affirm to allow its members to pay for items over time, according to a new shareholder letter. This means that Costco members will soon be able to pay for items through a monthly payment plan offered through Affirm. During an earnings call on May 8, Affirm CEO Max Levchin opted to keep the launch date of the new online partnership with Costco under wraps. Related: Costco makes controversial move to avoid high tariff costs "I don't think we are announcing a timeline, but obviously wouldn't talk about it if we didn't think that will be at some point in a reasonable future," said Levchin. Costco already offers a buy now, pay later option called Flex Pay through its partnership with Citi Bank; however, it is currently only available for Costco Anywhere Visa Card members. Through Flex Pay, cardholders are able to split eligible purchases of $75 or more into fixed monthly payments (no interest) of up to 24 months. The move from Costco comes when "buy now, pay later" has grown in popularity, as many consumers battle inflation and higher costs of living. Companies such as Klarna, Paypal Pay, and Afterpay are known for offering this service. Many of these companies have recently partnered with retailers such as Target, Walmart, Amazon, and even DoorDash to offer consumers "buy now, pay later" options. More Retail: AT&T quietly issues stern warning to customersSam's Club makes a big change to a beloved membership perkGameStop announces risky move amid store closures While this service can be convenient for shoppers, it can have major consequences if not used cautiously. A new survey from Bankrate found that 30% of U.S. adults have used at least one "buy now, pay later" service to purchase a product. Also, 49% of the adults who have used the service said that they have encountered at least one issue with it. Roughly 24% said that they spent more money than they should using the service, while 16% said they missed a payment, and 15% said they regretted making the purchase. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
