Inflation Squeezes Costco’s Earnings

ISSAQUAH, Wash. — Costco Wholesale Corp. here yesterday saw its stock plummet more than 12% after it issued a warning that its net income for the current quarter will fall short of expectations, in part due to its effort to keep prices down amid rising product costs. Fellow club store operator BJ’s Wholesale seemed to suffer from guilt by association, as the market dragged its shares down about 9%. In a prepared statement yesterday, Costco said earnings for the fourth quarter will be “well below” consensus estimates of $1 per share, although it declined to be more specific, citing “moving targets” that could impact its profitability. In a conference call with analysts, Richard Galanti, Costco’s chief financial officer, attributed much of the blame to rising fuel prices. “Primarily, it is rising energy costs and its many impacts,” he said. “It has impacted our freight cost at all levels of the merchandise distribution chain, and it’s impacting the direct cost to merchandise.” The company is scheduled to report results for the quarter, which ends Aug. 31, on Oct. 8.

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