Costco restricts purchases of paper goods, water and key items amid supply chain delays
Costco restricts purchases o...
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Costco restricts purchases of paper goods, water and key items amid supply chain delays

24 September 2021
2 min.
Costco restricts purchases of paper goods, water and key items amid supply chain delays

Purchase restrictions

Costco has confirmed that it will begin to reduce purchases of basic household items after delays in the supply chain, which is a complete storm for many retailers.

Costco CFO Richard Gallanti said: "We will be imposing some restrictions on our core products, including bath dishes, roll towels, Kirkland allspice and cleaning disruptions due to increased delta demand."

Wholesalers have already warned customers about delays in product availability.

Costco's current supply chain and inflationary pressures include delays at ports, rising labour costs and a shortage of all containers, trucks and driver parts, raw materials and components, with most basic products selling out within 2 weeks.

Warrants estimate that Costco's overall product price increase is now in the range of 2.5% to 3.5%, compared with 3.5% to 4.5% in the previous quarter.

Costco and its suppliers raise both the price of containers and shipments by 2-6 times, 4-8% for pulp and paper products, 5-11% for plastic and polymer products, such as garbage bags, glass and containers, and 3-10% for some apparel.

At Costco, the prices of aluminum foil and soda cans increased in the single-digit range, and the prices of fresh food in the middle of the second half of the single-digit range. Meat prices, on the other hand, rose sharply to a double-digit range in the second half of the year due to soaring feed, labour and transport costs. Costco's buyers say that items such as butter, coffee and nuts hit 5-year highs.

Therefore, the ongoing chip shortages affecting Costco's electronics and appliances are likely to continue until 2022.

To deal with this pressure, Costco orders a margin to ensure that you get the goods you need on time. Next year we will also charter three container ships between Asia, the USA and Canada. Each ship can carry 800-1000 containers at the same time and in total will make about 10 deliveries in 2022.

Despite Costco's problems, the company exceeded its expectations for the fourth quarter on Thursday.

The company reported earnings of $1.67 billion, or $3.76 per share, compared with $1.39 billion per share, or $3.13, a year ago. Total revenue was $62.67 billion, up from $53.38 billion a year earlier. Wall Street had expected earnings per share of $3.54 and total revenue of $61.45 billion.

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