Costco getting hit by energy costs


Costco is getting hammered today because it warned earnings will fall short due to higher inflation.

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Costco Wholesale Corp., which had been one of the few bright spots in retailing, said today that its earnings will miss Wall Street expectations, as it struggles with higher energy costs that are crimping its bottom line.

Shares in the nation’s no. 1 warehouse club operator plummeted more than 12 percent in morning trading Wednesday.
LA Times, 24 Jul 2008

This was to be expected as the PPI hit its highest level in 26 years. It begs the question of whether producers can and/or will pass through higher costs to consumers. If Costco can’t pass on higher energy costs, who can? And does Costco’s warning portend weaker earnings from companies or higher costs for consumers?

Regardless, it’s a good thing oil is below $125. That should take some of the edge off.

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