MW Costco's tariff cure includes cheaper eggs, rerouted items and U.S.-made mattresses

By Bill Peters

As other retailers talk about increasing prices, Costco says it's going 'full force' on lowering them

As analysts zero in on the impact of tariffs on retailers' costs and consumer behavior, executives at Costco Wholesale Corp. on Thursday said they would stay focused on lowering prices where possible, while leaning on its Kirkland brand, local sourcing and rerouted shipments.

Management made the remarks as the big-box membership chain reported fiscal third-quarter profit and revenue that topped Wall Street's expectations. Same-store sales, however, came in a bit light.

"We're going to continue to invest in price," Chief Executive Ron Vachris said on Costco's $(COST)$ earnings call Thursday. "It's what we do. It's how we grow our business, and we're going to continue to try and mitigate as much of this impact on tariffs as we can for our members."

He added: "It's full force ahead on lowering prices where we can."

Chief Financial Officer Gary Millerchip also said price increases were "always seen as a last resort."

Shares of Costco edged 0.6% lower in after-hours trade on Thursday.

Management said that to mitigate the impact from tariffs, the company had rerouted items it got from countries vulnerable to those import taxes to markets outside the U.S. They said Costco had also stocked up early on some summer items, like patio and athletic gear, and was bringing in more U.S.-made goods to its U.S. stores, like mattresses and pillows. Goods brought in from China, Trump's biggest tariff target, account for around 8% of Costco's U.S. sales, the company said.

Elsewhere, executives said, they'd managed to lower prices for things like eggs, butter and olive oil. Egg prices - which over the past year became a shorthand for consumers' struggles with inflation - were down around 10% at Costco stores.

Many of Costco's peers have tried to convey restraint on raising prices as they wrestle with the starts and stops of the U.S.-led trade war. After Walmart Inc. $(WMT)$ this month said it would have to raise its prices, President Donald Trump told the retailer to "eat" the tariffs.

Trump has used tariffs, and negotiations related to them, in an effort to steer global trade toward U.S. interests, and to extract other concessions. Economists have worried they will lead businesses to increase prices, as they try to neutralize the extra costs.

The harshest of Trump's tariffs, announced in early April, are on hold for now. A federal court on Wednesday also blocked many of those duties, although an appeals court paused that decision on Thursday.

Costco earned $4.28 a share, with total revenue of $63.21 billion, during its third quarter quarter, which ended on May 11. Same-store sales were up 5.7%, with e-commerce sales up 14.8%.

Analysts polled by FactSet expected Costco to report adjusted earnings per share of $4.24 for its fiscal third quarter. They expected $63.13 billion in revenue. However, they also forecast a 6% increase in same-store sales, a bit higher than what Costco reported.

During its third quarter, sales of Costco's Kirkland Signature items, which include food and home goods, outpaced overall sales growth. Extended gas station hours also helped to draw customers.

"This report reflects that cost-conscious consumers are still hungry for deals," Brian Mulberry, a client portfolio manager at Zacks, said over email.

Heading into the results, analysts offered up a familiar refrain on Costco: Its size is its advantage - with the suppliers it buys from as well as the customers it sells to - as both lower- and higher-income shoppers continue to seek out deals and navigate rising costs of living.

"There's probably not a lot that can come from this print that will change the market's perception that [Costco] is a good place to be," UBS analyst Michael Lasser said in a research note last week.

Over the past 12 months, Costco's stock has risen 23.7%. Lasser said Costco's "all-weather-type characteristics" would give it an advantage over most other retailers. He noted that the products Costco sells that are exposed to tariffs make up one-third of its U.S. business.

He added that the company would probably use the current turmoil in the economy to keep prices low and solidify its position as a hub for value purchases.

"This should fuel its traffic and membership momentum, leading to continued market-share gains," he said.

During Costco's earnings call on Thursday, Lasser asked about the limitations of the chain's growth in the U.S., and potential issues surrounding overcrowded stores and parking lots.

Vachris said that most of its planned store openings in the fourth quarter would help take the traffic pressure off of other busy warehouses. Technology projects intended to help customers check out items more quickly would also help, he said.

"The backside of that is it turns over parking spaces quicker," he said. "And when you turn over parking spaces quicker, it makes the whole experience better."

-Bill Peters

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May 29, 2025 19:44 ET (23:44 GMT)

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