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Costco Wholesale Corp. (COST) - Get Costco Wholesale Corporation Report shares traded lower Friday after the wholesale shopping club group said it may have to raise prices in order to offset potential tariffs on China imports even as it posted stronger-than-expected third quarter earnings.

Costco said diluted earnings for the three months ending on May 12, the company's fiscal third quarter, came in at $2.05 per share, up 20.5% from the same period last year. On an adjusted basis, earnings of $1.89 topped the Street forecast of $1.82. Group revenues, Costco said, rose 7.3% to $34.71 billion, again beating analysts' estimates, while same-store sales rose by a Street-beating 5.6%.

However, with the U.S. Treasury Department studying a new list of $300 billion worth of China-made goods for fresh import tariffs, Costco joined the chorus of many major U.S. retailers in warning of potential price increases in what CFO Richard Galanti called a "fluid" situation.

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"At the end of the day prices will go up on things," Galanti told investors on a conference call. "What's interesting is that it's hard to predict what the impact is. We want to be the last to raise prices, it doesn't mean we're going to wait and not do it at all. We've have to be pragmatic about it."

"We've seen strengthened patio furniture even with certain tariff price increases although part of that is because there was a little bit of slowdown in patio furniture because of the bad weather in January, February and we get into seasons early," he added." So, again, it's hard to analyze each one. I think what we're most cognizant of is a key price point."

Costco shares were marked 1.7% lower Friday at $237.36 each, a move that would trim the stock's year-to-date advance to around 16%.

We continue to believe that COST's advantaged business model, consistent execution and increasing connection with its loyal membership base makes it deserving of its premium valuation, which is rare among retail/consumer staples," said BMO Capital Markets analyst Kelly Bania, who has a $275 price target an an 'outperform' rating on the stock. "Despite the rapid change across the retail landscape, we believe Costco's model insulates it from various pressures that many other retailers face