I was suspicious of this claim so I investigated the data from Costco’s public statements for the 12-week period ending 18th February 2024.
Revenue from merchandise sales was $57.33 bn while their cost was $51.14 bn. Selling and administrative costs (i.e. worker salaries, facilities, &c.) was $5.24 bn. The total costs add up to $56.38 bn, meaning their profit on merchandise sales was $0.95 bn, or 1.6%. This is unchanged compared to the 12-week period ending 18th February 2023 (last year).
Based on the data, I find the claim that Costco is participating in greedflation questionable when their profit margin hasn’t at all increased from last year.
Rather, the growth on their bottom line appears attributable to (1) an increased volume in sales and (2) an increase in membership fees. Sales volume increased from $54.24 bn in 2023 to $57.33 in 2024. Hence the same 1.6% represents the same slice of a larger pie, resulting in greater profit in absolute terms. Additionally, revenue from membership fees increased from $1.02 bn to $1.11 bn (up 8.8%). Membership fees are basically 100% profit for Costco and it makes up most of their net revenue.
Based on this data, I do not agree with the article’s conclusion at all.
The data is available here
In the interest of disclosure: I own a very small amount of Costco stock (less than half a share).
Yeah, was gonna say, this doesn’t make sense given their business model.
That said, it does feel like they have changed their offerings to more expensive options lately. That, plus supplier price increases, could explain the sentiment.
They are still the most cost effective on the vast majority of their products when compared to other stores.
Costco uses cost-plus pricing and caps its markup at 14% for outside brands and 15% for in-house brands (Kirkland). Other stores that use “value based pricing” are seeing some stuff marked up 600%. I only shop Costco a few times a year, but they are not where we need to focus on price gouging.
