ISSAQUAH, Wash. — More aggressive pricing by supermarkets and Wal-Mart is not having much impact on Costco Wholesale Corp., the company said here last week.
“Our average markup is 11%, so we're not being arrogant when we say it's hard to beat our overall pricing, and we hold our own very well,” Richard Galanti, senior vice president and chief financial officer, said during a conference call with analysts to discuss financial results for the first quarter, which ended Nov. 22.
“We really don't see a lot of impact from supermarkets,” he added. “We realize most members shop elsewhere for sale items or smaller sizes, but from a competitive standpoint we don't feel our pricing is being impacted by what supermarkets are doing.”
The weak economy has helped increase the frequency of food shopping at Costco, Galanti added.
Net income for the quarter rose 1.1% to $266 million, while net sales increased 5.5% to $16.9 billion. Comparable-store sales were up 3%, including a 2% lift in the U.S.
Galanti said overall food comps rose in the low single digits, with meat and produce showing strong unit-volume increases because of deflation.
Overall food deflation is running in the range of 5% to 6%, he noted, “but it isn't getting worse, and once we get to January or February the cycle will hopefully be broken a little bit.”
Costco plans to open 16 new stores this fiscal year, at a cost of $1.3 billion “or a shade higher,” Galanti said, for a total square-footage increase of 3%.
In response to a question, he said Coca-Cola products will be back on the warehouse shelves beginning today. He declined to discuss the issues that led Costco to drop Coke for the past few weeks, although he said signs at the point-of-sale informed members that Costco tries to provide them with products at competitive prices and good values or else it won't sell those products.
