Costco accused of “greedflation”: Wholesaler reports increase in earnings while hiking up prices : business

[–] NateNate60 103 points 2 weeks ago* (last edited 2 weeks ago) (7 children)

I was suspicious of this claim so I investigated the data from Costco's public statements for the 12-week period ending 18th February 2024.

Revenue from merchandise sales was $57.33 bn while their cost was $51.14 bn. Selling and administrative costs (i.e. worker salaries, facilities, &c.) was $5.24 bn. The total costs add up to $56.38 bn, meaning their profit on merchandise sales was $0.95 bn, or 1.6%. This is unchanged compared to the 12-week period ending 18th February 2023 (last year).

Based on the data, I find the claim that Costco is participating in greedflation questionable when their profit margin hasn't at all increased from last year.

Rather, the growth on their bottom line appears attributable to (1) an increased volume in sales and (2) an increase in membership fees. Sales volume increased from $54.24 bn in 2023 to $57.33 in 2024. Hence the same 1.6% represents the same slice of a larger pie, resulting in greater profit in absolute terms. Additionally, revenue from membership fees increased from $1.02 bn to $1.11 bn (up 8.8%). Membership fees are basically 100% profit for Costco and it makes up most of their net revenue.

Based on this data, I do not agree with the article's conclusion at all.

The data is available here

In the interest of disclosure: I own a very small amount of Costco stock (less than half a share).

[–] errer 19 points 2 weeks ago

Wow, incredibly informative. Someone buy this person a hot dog and soda!

[–] ohlaph 17 points 2 weeks ago

Wait, you own stock in Costco? Obviously you are biased here.... /s

[–] recklessengagement 10 points 2 weeks ago

Yeah, was gonna say, this doesn't make sense given their business model.

That said, it does feel like they have changed their offerings to more expensive options lately. That, plus supplier price increases, could explain the sentiment.

They are still the most cost effective on the vast majority of their products when compared to other stores.

[–] RustyHeater 5 points 2 weeks ago

Costco uses cost-plus pricing and caps its markup at 14% for outside brands and 15% for in-house brands (Kirkland). Other stores that use "value based pricing" are seeing some stuff marked up 600%. I only shop Costco a few times a year, but they are not where we need to focus on price gouging.

[–] hark 3 points 2 weeks ago

Seems to me like the greedflation would be further up the chain, like suppliers.

[–] [email protected] 3 points 2 weeks ago

profit on merchandise sales was $0.95 bn, or 1.6%

Now compare that to Microsoft's net profit margin of over 36% and ask that question about greedflation again.

[–] 0110010001100010 11 points 2 weeks ago (1 children)

A new analysis from Accountable.US found that Costco reported consistently high profits while raising store prices

So....just like the rest of corporate America?

[–] Snapz 3 points 2 weeks ago

Your comment only serves to lessen the burden on the shitty corporations by trying to normalize / "who cases" this. Maybe you think you're helping?

[–] [email protected] 9 points 2 weeks ago* (last edited 2 weeks ago) (3 children)

"lookie here! hot dog combo is still a buck fifty! we're the good guys, honest!"

//raises prices everywhere else//

(they're still priced above cost btw. hot dogs are cheap, especially when you own the factory. fountain syrup per serving is also inexpensive, and they no-doubt have a sweetheart deal from pepsico to keep them loyal)

[–] rdyoung 33 points 2 weeks ago (1 children)

Even with some or most prices increased, Costco is still one of the best places to shop for a ton of reasons that any member can fill you in on.

It's clear that plenty of people don't understand how this shit works in real life. Did no one here see Costcos official response to a couple of stores voting to unionize?

I am not one to praise any retail whatsoever but I preach the holy site that is Costco to anyone that will listen. Even the single people out there can benefit, if you wear prescription glasses and/or have any meds you need on a regular basis, those alone could save you at least the first years membership.

[–] [email protected] 4 points 2 weeks ago (2 children)

Costco began, and allegedly is still, a bulk buying savings membership warehouse. But the transition to mostly "organic" foods that are double the price or more of their non "organic" labeled products is just greed. Frozen blueberries 3lbs $9.00, sams non organic 4lbs less than $9.00. White mushrooms $5.99, sams $3.49, same size. And "organic" fresh produce dies faster than regular. My store got rid of the bag of spinach, $4.99 2.5lbs and only has the bin 1lb for $3.99, that would be $10.00 for the same product, Just a few small examples.

[–] billiam0202 6 points 2 weeks ago (1 children)

On the other hand, buying Sam's means supporting Walmart and the Walton family, so it's up to you how much that affects your calculus.

[–] [email protected] 0 points 2 weeks ago

Sadly Costco and Sams are now just the same greedy retailers. I never thought Sams would have me spending more there than Costco. Once the good CEO retired it all went downhill.

[–] rdyoung 1 points 2 weeks ago* (last edited 2 weeks ago) (1 children)

If you or anyone is doing all of their shopping at one at store, that's a you problem. Despite how okay we are doing, we still shop around for deals and take advantage of things like teeter doing multiplied points on Fridays towards gas discounts, checking out Aldi and Lidl for deals, etc.

Costco does not have a large variety or selection of what they offer but most things are pretty much guaranteed to be a better deal than elsewhere. For example, because of vpx having issues I've settled on Celsius as my current caffeine+other stuff drink when I am working or otherwise need the boost. Amazon and elsewhere sell 12 packs for like $19-$25+, Costco has the same pricing (approximately) but it's 18 cans instead of 12. Another example is a greenworks riding lawnmower I've been eyeballing as soon as I can find the 6k+, bb has it for about the same price or even cheaper when it's on sale but Costco includes $2400+ worth of extras like twice the batteries and the not cheap clippings bag for the back of it for the same price.

Long story short. Take advantage of what Costco has to offer and do what you have to do to save a buck. Don't just assume that it's a better deal because reasons but I've learned that for a lot of things, Costco is going to be a better deal even if it's priced slightly higher or same.

Oh and anyone reading this. Stop buying most of your meat and produce at regular stores like Costco, teeter, publix, etc. Find one or 3+ local farms that sell directly to the public, also keep an eye out for what are called CSAs, you prepay an amount upfront in late winter, early spring and then you get a set number of weekly pickups that are based on what you want and what they have fresh and ready to go. The ones we have worked with are usually open to swapping things out if you end up with more of one thing than you would like but that is based on what they have available for a swap. There is also a local one that we hit up every so often for farm fresh milk that is so much better than any store bought of any brand.

[–] [email protected] 0 points 2 weeks ago (1 children)

I never shop at one store. But I'm irked that Costco keeps pandering to people who will pay anything for food. Peanut butter is cheaper at Winco than Costco. Staple foods are so expensive these days.

[–] rdyoung 0 points 2 weeks ago

If you actually believe that for most products, you don't know how to compare across stores, brands, etc. Yes, it's cheaper for some things elsewhere because A) You don't have to buy as much as a min purchase and B) what you are comparing at a cheaper store is actually truly cheaper in all ways. You need to compare not only ounce to ounce but quality as well.

I'm seriously amazed (not really) at the people who shop Costco but don't understand how and why it works the way it works.

You should also check out Lidl and Aldi if they are near you.

[–] NateNate60 3 points 2 weeks ago

The hot dog being $1.50 is still good considering that they could probably double the price, which would triple or quadruple their profit on it and people would still happily buy.

Of course, it's not because of altruism that they do it. They do it because people use the hot dog as a symbol of the good value for money that Costco supposedly provides.

[–] SkyezOpen 2 points 2 weeks ago

OK but find lunch for 2 people for 3.70 somewhere else

[–] Snapz 8 points 2 weeks ago (1 children)

Costco CEO Ron Vachris further suggested a [membership] price increase would actually benefit both the company and consumers, during an earnings call on May 30. An increase would award Costco additional revenue that could allow the company to lower store prices and help customers save money over time, Vachris said.

"Could allow" hmmm....

Also maybe those current huge profits "could allow"? Oh no... So just no intention of any of this in reality, huh? Okay.

[–] Delphia 4 points 2 weeks ago (2 children)

Hypothetically say the price of membership goes up 20% and they put all of that back into keeping prices on goods lower.

It would benefit big families and people who shop there more than people who dont. Keeping the whales happy is more important than the guy who just likes cheap rotisserie chickens and hot dogs.

[–] [email protected] 3 points 2 weeks ago (1 children)

Would it? Their profit margin on goods is minuscule. Their profit margin on memberships is (practically) infinite. Losing subscribers could cost them big on their money printing department, and may not end up having the benefit they're after.

[–] Delphia 0 points 2 weeks ago

It could very well backfire, just saying that "putting membership price up to save you money" sounds like bullshit but in the context of retaining people who spend thousands a month at the cost of (potentially) the people who barely use their memberships and spend very little does make some sense.

[–] Snapz 1 points 2 weeks ago (1 children)

I'm just not sure you seriously believe that there's any chance they "put all of that back into keeping prices on goods lower". That's not the reality we live in.

If anything, maybe they will discount shrimp by $1 for thirty days for a headline (and then of course they'll quietly raise the price of blueberries by $1.50 for the rest of that year).

They won't just not profit when they can and they won't not "get revenge" on the consumer for saving.

[–] Delphia 0 points 2 weeks ago

Its all hypothetical but remember they have literally unlimited access to our analytics including name and age and we pay them for the privilege.

If their marketing and research people have concluded that if they up membership $10 annually from 130,000,000 members, lose 1000000 people who have decided that the price hike is just too much, take the 1.2 Billion in extra funds and pump it back into making bread, milk and eggs significantly cheaper to get more people doing their weekly shop there that they will make 2.9 billion more on impulse purchasing they will do that.

Corporations gonna corporation, its on consumers to not be dumb fucks.

[–] PoliticalAgitator 3 points 2 weeks ago

All inflation is "greedflation". It's the result of millions of people trying to figure out exactly how much money they can fuck you out of, down to the cent.

[–] _sideffect 3 points 2 weeks ago (2 children)

I've been noticing that, and buying less at Costco recently too.

A box of fish, cod, used to be 11.99 before covid... Now? 16.99, 15.99 on sale.

Fucking insane.

[–] [email protected] 4 points 2 weeks ago

I noticed that too, but when I tried to buy elsewhere they were even more expensive (not wholesale)

I've been avoiding kroger as much as I can since they increased prices the most, at least for the stuff I buy

[–] dpkonofa 2 points 2 weeks ago

But doesn’t it cost Costco more to acquire that stuff in the first place? You can’t just say that the price is higher so Costco is making higher profits unless you compare the cost of goods to what they were before too. According to the data I could find, Costco’s profit margin’s are lower than they were before. Their total profits from last year, for example, were only higher because they sold more memberships. They actually made less in profit from the products despite the fact that the products cost more this year.

[+] metallic_substance 1 points 2 weeks ago* (last edited 2 weeks ago)

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