Costco has a singular mission and it’s willing to do whatever it has to do to deliver on its promise to members.
The warehouse club has never been super innovative as a retailer. It doesn’t need to be because its job isn’t to be flashy or offer the newest technology. It’s to have the lowest prices.
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That’s something the company has built its entire infrastructure around. The chain’s buyers famously leverage their buying power to get concessions from vendors.
That could mean changing packaging to save a few cents, or it could be a wholesale manufacturing change to get the price where Costco needs it to be.
During the pandemic, the warehouse club famously rented its own container ships to be able to control the flow of goods to its stores. That was an extreme measure, but it was necessary given what was going on in the world.
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It will not be a surprise to any member that Costco has significant plans to maintain its pricing advantage and not raise prices due to tariffs. The chain is not immune to what’s happening in the world, but it’s actually in a much better position than you would think.
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Costco shares surprising tariff news
CEO Ron Vachris made it clear that he was aware that tariffs and a global trade war would have some impact on his company. He also tried to reassure members that the company would work hard to keep prices down.
“As we look ahead to the remainder of this fiscal year, headwinds from foreign exchange look likely to continue. Given events over the last week, it is difficult to predict the impact of tariffs, but our team remains agile, and our goal will be to minimize the impact of related cost increases to our members,” he shared during the company’s second-quarter earnings call.
Members may also be surprised at how little exposure Costco has when it comes to the items that will be hit the hardest by tariffs.
“About a third of our sales in the U.S. are imported from other countries, and less than half of those are items coming from China, Mexico, and Canada,” he shared.
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The CEO is also confident in Costco’s ability to be flexible during challenging periods of history.
“In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices. And our teams will continue to rise to this challenge by leveraging our global buying power, strong supplier relationship,s and innovation.
Costco’s CFO sees changing purchasing patterns
Costco CFO Gary Millerchip shared that he has seen members acting differently when it comes to what they’re buying.
“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 said.
Millerchip actually expects the chain’s members to become even more careful when it comes to opening up their wallets.
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“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 added.
