People think grocery merchants have a 35.2% net profit margin, 14 times larger than their real 2.5%, and that food-at-home inflation is 24.3%. Costco has actively avoided that.
"We're a big believer that if you increase the value by decreasing the pricing, you're going to generate more sales," said Chief Financial Officer.
"Our predicted price inflation for the past fiscal year was 8% in the fourth fiscal quarter, which concluded last August. Q1 estimates fell to 6% to 7% year-over-year" he said.
According to purchasers, "In Q2, we believe that the corresponding year-over-year inflation rate has fallen down to 5% to 6% range and even a bit lower than that near the end of the quarter."
Since Costco hasn't fully passed on price hikes to customers, that's excellent news for consumers and the warehouse club.
Reduced expenses allow the corporation to keep pricing low and profit margins high.
The CFO said things are getting better. Inflation allows corporations to raise prices, so few take such a public statement.
"Many things keep getting better. Commodity prices are started to decline, although not back to pre-covid levels. Chicken, bacon, butter, steel, resin, nuts, and "stated.
Walmart's food division CFO predicts inflation decreasing to 5%-6% from 6%-7% across its items, while Costco sees it rising to 6%-7%.
"Food inflation has been the most tenacious of all categories. In Q3, we were in the mid-teens, and Q4 hasn't dropped much" he said.
"If dry groceries and consumables inflation is three or five, that's on top of 15. The consumer still has to deal with wallet pressure."