Whether you're looking for household goods at discounted prices or need to buy your grocery items in bulk, Costco is the go-to retailer for millions of shoppers across the U.S. But despite its ability to attract a loyal following, Costco has made a number of changes recently that haven't thrilled customers. In April, the warehouse retailer got rid of its special COVID hours for seniors, and just this month, Costco ended its mortgage program for members. Now, the retailer has a new warning for shoppers about changes it's making to its prices. Read on to find out what Costco is alerting members to as inflation rises.
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Inflation is hitting record highs and continuing to rise.
ShutterstockInflation has risen dramatically in the U.S. recently, hovering near a 40-year high and presenting new problems for consumer and companies, Fox Business reports. During a third quarter 2022 earnings call on May 26, Robert Nelson, Costco's senior vice president for investor relations and treasury, told analysts that inflation "continues" and is still adding pressures to the company.
In the first quarter, Costco estimated that price inflation was around 4.5 percent to 5 percent, and in the second quarter, it was in the 6 precent range. Now for quarter three, "estimated price inflation was in the 7 percent-ish range," Nelson said.
Costco just warned that it has to raise some prices as a result.
ShutterstockIf you're a fan of Costco's food, you've probably come to rely on the retailer's consistent low costs. But as a result of rising inflation, Nelson told analysts that the company has had to increase the prices for some of its food products recently, MarketWatch reported.
"As you know, we’re not the first one to go up when we have higher costs," he said. "I think just recently, it may have been after the end of the quarter, reluctantly, we took up the price of our muffins and our croissants, I think, $1 as the price of a lot of those raw materials have continued to escalate to two times and three times and four times what they were last year."
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But the company said it won't raise the prices on all food items.
ShutterstockCostco still refuses to raise the price of certain food products. "We always want to be the best value in the marketplace," Nelson said, per Fox Business. "And to the extent that we continue to show that, I think it's easier for us to pass on higher pricing, or higher freight costs, or raw material cost, assuming that we show that value in the marketplace."
Nelson said he particularly wanted to address "incorrect information floating around on social media" about the company increasing the price of its beloved $1.50 hot dog-and-soda combination. "Let me just say the price, when we introduced the hot dog-soda combo in the mid '80s, was $1.50. The price today is $1.50, and we have no plans to increase the price at this time," he reiterated.
Inflation has also impacted Costco's membership costs.
ShutterstockCostco isn't just looking at the prices of food items either. Earlier this year, financial analysts and shopping experts predicted that the warehouse retailer would raise its annual membership fees in June. After all, Costco usually raises membership fees every five years and the last hike was in June 2017. During an earnings call on March 3, Costco's Chief Financial Officer Richard Galanti even noted that five years from the last time they hiked membership prices would be June 2022, The Street reported at the time.
But Nelson has now confirmed that Costco is no longer planning to raise the cost of its membership any time soon. "Given the current macro environment, the historically high inflation and the burden it’s having on our members and all consumers in general, we think increasing our membership fee today ahead of our typical timing is not the right time," he told analysts.
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