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On a day when Federal Reserve Chair Jerome Powell signaled inflation may pop as the U.S. economy reopens, Costco said it too is seeing its own food inflation; in bacon.
|COST||COSTCO WHOLESALE CORP.||319.04||-4.88||-1.51%|
“Bacon is up 45% in pounds, for whatever reason there is a lot of demand there so there is a little bit of a challenge,” said Chief Financial Officer Richard Galanti during an investor call.
Galanti, who is skilled at explaining Costco’s hits and misses in plain speak, ballparked the inflationary uptick. “Some categories are in that 2-4% range, some like meat and pork a little higher than that, produce is flat” he detailed in response to a question. However, overall inflation is flat to up 1-1.5% he clarified.
It's unclear if higher costs for meat and pork will be passed along to shoppers.
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There are several factors pushing pork prices higher, as reported by Farm Journal's Pork including herd losses for U.S. hogs tied to "porcine reproductive and respiratory syndrome (PRRS) here – especially in Minnesota and Iowa", additionally there is the African swine fever hurting China's hogs.
As for broad U.S. inflation, it continues to run below the Fed’s preferred level of 2% but it is showing signs of an uptick in items such as energy. Oil prices hit $63.83 per barrel level on Thursday, the highest level since April of 2019, as tracked by Dow Jones Market Data Group. Forecasters are now predicting that may trickle down to prices at the pump in the coming weeks.
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As for second-quarter results, the warehouse retailer posted earnings per share of $2.14, below the $2.45 analysts polled by Refinitiv were expecting. The company noted higher costs related to “COVID-19 premium wages” for the impact. Revenue was $44.77 billion, 14.5% higher than $39 billion earned in the same period a year ago. E-Commerce sales during the quarter jumped 75.8%.
COSTCO BOOSTING MIN. WAGE TO $16 PER HOUR
Last week, while testifying before Congress, CEO Craig Jelinek announced that his workers would be getting a raise.
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"Since Costco's inception, the company has been committed to paying the employees very competitive retail wages and providing them broad and affordable health care benefits," Jelinek said. "Two years ago, we moved our starting hourly wage to $15 everywhere in the U.S. Effective next week, the starting wage will go to $16” he disclosed.
Shares of Costco have slipped 15% year-to-date.
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