ISSAQUAH, Wash. — Costco Wholesale here experienced inflated costs for fresh meat during its fiscal first quarter, but swallowed the increase rather than pass it on to shoppers.
“There were some higher prices and higher costs we didn't pass on to the consumer because meat is such a competitive item,” Richard Galanti, chief financial officer, said in a conference call last week.
Those increases, accompanied by dropping prices for electronic items, caused an overall margin decrease of 2 basis points, to 10.56% of sales, for the 12-week quarter ending Nov. 26, Costco said.
Overall sales of $13.9 billion increased by 9% during the quarter, with same-store sales increasing by 4%, Galanti said.
Net earnings increased by 10% to $237 million, as Costco shoppers increased their average shopping basket by 2.5% to 3%, compared with the same period a year ago, and also shopped more frequently, Galanti said.
“Frankly, it was a pretty good show given sales this quarter and a competitive landscape out there,” he said.
Costco said it would take a charge of $70 million in the second quarter to hike the exercise price of stock options it previously issued and compensate around 1,000 employees for taxes associated with their options. Those options were granted at prices currently below their current prices, the company explained.