Costco has held prices steady on essentials like bananas and pineapples, absorbing margin hits to shield members from tariff impacts. The move reflects a pragmatic approach as the warehouse giant maneuvers through a fluid trade environment.
Tariffs Pinch Fresh Goods
Costco Wholesale is taking a measured approach to tariff-driven inflation, prioritizing core items like bananas and pineapples to ensure stable prices for members. CFO Gary Millerchip said during the company’s latest earnings call that Costco is working with suppliers and accepting margin reductions on these essentials, while allowing higher prices for less critical goods like flowers.
The company’s strategies include rerouting goods away from tariff-heavy markets, accelerating purchases of seasonal items, and leaning more on its private-label Kirkland Signature products. CEO Ron Vachris noted these actions have helped sustain financial performance while preserving Costco’s reputation for low prices.
Legal Uncertainty Clouds Outlook
The timing of Costco’s call was notable, coming just after a federal court’s partial block of President Trump’s tariffs, a ruling quickly stayed by an appeals court. This legal whiplash has left companies grappling with immediate uncertainty: Will tariffs hold, and if they’re rolled back, how quickly might suppliers pass on savings?
Millerchip was candid about this unpredictability, noting that while some suppliers are staying flexible, “it was difficult to predict” how quickly lower tariffs might translate into price relief. Instead, he emphasized that Costco’s focus remains on responding nimbly to the current moment—whether that means holding prices on key items or working with suppliers to maintain quality and availability.
Beyond the shelf, the company reported lowering prices on items like eggs, butter, and olive oil, a sign of some relief for shoppers already juggling broader cost-of-living pressures. Expanded gas station hours and lower fuel prices have also driven record-breaking gas sales volumes for Costco, highlighting how even marginal savings in one area can boost traffic and loyalty.
A Measured Margin Trade-Off
Costco’s approach demonstrates a disciplined stance in managing tariff uncertainty. This highlights the importance of flexibility in procurement strategies and the value of supplier partnerships in maintaining operational stability. As trade policies evolve, companies will need to maintain a similar balance: weighing short-term financial impacts against long-term customer loyalty and brand resilience.
