Costco Limits Toilet Paper, Paper Towels & Bottled Water Purchases Over Inflation, Supply Chain Breakdown

Spikes in international shipping costs due to COVID and the “inflationary environment” created under the Biden administration are driving up commodity costs and shortages, according to Costco Executive Vice President and Chief Financial Officer Richard Galanti.

Galanti explained during a conference call Thursday how the company has been dealing with supply-chain breakdowns and inflation in the last few months.

"From a supply chain perspective, I want to go back to two things, supply chain and inflation. From a supply chain perspective, the factors pressuring supply chains and inflation include port delays, container shortages, COVID disruptions, shortages on various components, raw materials and ingredients, labor cost pressures and trucker and driver shortages — trucks and driver shortages. Domestically, anecdotally rather from a — even on a domestic side, various major brands are requesting longer lead times. Some cases difficulty in finding drivers and trucks on short notice. Lead times on ingredients and packaging have been extended in some cases. So planning is crucial which I feel we’ve people have done a great job with that over the last several months. Also we’re putting some limitations on key items like bath issues, roll towels, Kirkland Signature water high demand related SKUs related to the uptick in the Delta related demand.

Furniture delays in some shortages of course traditional rollout times to go from 8 to 12 weeks — from 8 to 12 weeks up to 16 to 18 weeks. And some ways, we think that’s an advantage, we’re selling out the generally merchandise once it’s received within two weeks on most items and we’ve ordered more and earlier. Same thing with toys and seasonal, we’re bringing in some of the items early. Chip shortages impacting many items as I mentioned in the last call. Examples of impacted items computers, tablets, video games, major appliances. The feeling is from the buyers as this will likely extend into 2022.

Again, we’re ordering as much as we can and getting in earlier. And I think as evidenced by most recent sales results, we’re doing okay with this. Despite these issues — sorry. In terms of transportation costs, they’re increasing — we’re reading about it every day. Containers, trucks and drivers all are impacting the timing of deliveries and higher freight costs. Despite all these issues, we continue to work to mitigate cost increases in a variety of different ways and hold down and/or mitigate our price increases passed onto the members"....

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