Richard Galanti, the CFO of Costco has issued a warning on Q3 earnings call of the company, saying that the retailer is experiencing inflammatory pressures, which includes shipping container shortage, increased cost of select items shipped from international borders and higher labor cost.
As per Galanti, the shipping cost have risen on imported cheeses, select apparel products, paper goods, fresh meats and plastic items including plates and cups. He also noted several product shortages right from oils to chips and chemicals distributed by facilities that are hit by storms and Gulf freeze.
Costco, in March, estimated that inflation was increasing in the 1-1.5 percent range; however, it now estimates the inflation is under the 2.5-3.5 percent range, excluding the gasoline sale. As per Galanti, turnaround time for the shipping containers to reach the US, supply the goods and come back to the overseas doubled from around 25 to 50 days.
In spite of these problems, Galanti said that Costco continues to work in order to mitigate price increases and delays in supply chain in the best possible way. The best way to handle delays in supply chain is through front-loading and adjusted ordering, added Galanti.
Besides the inflation concerns, Costco still managed to report a quarterly net sale growth of $44.38mn, up from the $36.45bn reported last year.