Costco became the latest retailer to say that the trade war between China and the U.S. will likely lead to higher prices, but the warehouse giant says it is taking steps to withstand the battle.
“At the end of the day, prices will go up on things,’’ said Richard Galanti, Costco’s chief financial officer, during an earnings call with investors. “We’re hopeful the ebbs and flows of the relations between our countries improves in that regard.’’
The Trump administration ratcheted up its trade battle with China this month when it hiked U.S. tariffs on $200 billion in imported Chinese goods from 10% to 25%. The president has also threatened to add a 25% tariff on virtually all the remaining $325 billion in products brought in from China.
Costco is just beginning to see the effect of the most recent tariff increases, affecting goods like furniture, bikes and luggage.
In some instances, the warehouse giant is looking to source certain goods from other countries. “We’ve gone to every supplier to see what we can do to reduce costs,’’ Galanti said. “In some cases, we’ve reduced order commitments.… And we’ve taken advantage of lower pricing on certain U.S. items that have been impacted the other way.”
Industry watchers have said that the tariff battle could make items ranging from smartphones to clothing more expensive, and also accelerate the shuttering of stores.
But tariffs don’t always scare off shoppers. Despite the increased import costs, patio furniture has sold well, Galanti says. “It’s hard to predict what the impact will be,’’ he says.
For the quarter that ended May 12, Costco reported it brought in $906 million in net income or $2.05 diluted earnings per share. That was up from $750 million, or $1.70 a share, during the same quarter last year.
