Costco Wholesale (COST) says it plans to reduce the number of Canadian products it carries in its U.S. retail outlets due to an escalating trade battle between the two countries over import tariffs.
Costco CEO Ron Vachris said the Seattle-based company is looking to source more products from non-tariffed nations to help keep costs low for U.S. consumers. However, remaining Canadian items on Costco’s U.S. store shelves are likely to see a price increase due to American import tariffs, said Vachris.
“The tariffs are very fluid right now, so it’s hard to give any predictions on what we can do, but our people are very well-equipped to lower prices and defer any cost increases that come our way. We’re going to do what we can,” said the CEO, adding that Costco sources less than 20% of its products from Canada, China and Mexico for its U.S. locations.
Tumbling Stock
Vachris’ comments were made as Costco reported a rare quarterly earnings miss, news that has sent COST stock down 6% on the day, its biggest decline in more than a year. Management said it’s difficult to provide forward guidance due to the impact of trade tariffs imposed by the U.S. government.
However, citing tariff implications for groceries, Costco management said margins are “much tighter” but that the company will work with suppliers to mitigate impacts on consumers. In addition to groceries, the company’s top sales categories included gold, furniture, and children’s toys, all of which grew double digits from a year earlier in the most recent quarter.
Is COST Stock a Buy?
Costco’s stock has a consensus Moderate Buy rating among 27 Wall Street analysts. That rating is based on 20 Buy and seven Hold recommendations issued in the last three months. The average COST price target of $1,100.80 implies 14.23% upside from current levels.
