Costco’s Sales Are Rising but So Are Its Costs

Costco Wholesale Corp. said demand surged in its latest quarter as the U.S. economy began to rev up, but the club-store chain warned it is facing higher costs for everything from workers to imported cheese.

The company on Thursday said it generated $45.28 billion in revenue for its quarter that ended May 9, up almost 22% from the same period last year. Analysts had predicted the chain would report $43.65 billion in revenue.

Costco has seen price increases in part because suppliers are paying more for containers and shipping as demand rises, finance chief Richard Galanti said. Expenses for paper goods, apparel and plastic items like cups and plants are up, as are costs for fresh meats and imported cheeses.

In March, the company estimated inflation was rising in the 1% to 1.5% range, but now it thinks it is up 2.5% to 3.5%, excluding gasoline sales, he said. Higher costs could put pressure on Costco’s margins.

“Inflationary factors abound,” Mr. Galanti told investors. The company is pushing to control costs and manage supply-chain pressures, including by purchasing inventory early, he said.

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