Insider reports claim that membership-only warehouse club operator Costco (COST) is in talks with Chinese suppliers to reduce prices. These sources say the retail chain reached out to suppliers to cut prices on goods sold in the U.S. This comes after President Donald Trump escalated the trade war with China via tariffs.
It’s unclear how Chinese suppliers will react to Costco’s push for lower prices. If talks don’t go well, Costco could turn to other sources for its goods. The company floated this idea to investors in its earnings report earlier this month.
What This Means for Costco’s Prices
Costco’s desire to reduce prices from suppliers makes sense. A major part of the retailer’s appeal to customers is offering cheap prices to those who pay for a membership. If it can’t do so due to the trade war, the member-only retail chain could see a drop in subscribers as consumers seek discounts elsewhere. That’s important to keep in mind as consumers are already being more careful with their spending due to inflation.
Costco isn’t overly reliant on Chinese suppliers. The company noted that only a third of its goods come from China, Canada, and Mexico. Of that third, less than half of the goods come from China. This could give it bargaining power to reduce supplier prices alongside its recent threats to seek supplies from cheaper sources.
Inflation and the trade war have weighed on COST stock already. The company’s shares are only up 0.15% year-to-date after an earnings per share miss earlier this month sapped the strength out of COST stock. Shares are also down 0.18% in pre-market trading today.
Is COST Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Costco is Strong Buy based on 20 Buy and six Hold ratings over the last three months. With that comes an average price target of $1,099.44, a high of $1,205, and a low of $907. This represents a potential 19.95% upside for COST stock.
See more COST stock analyst ratings
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