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Costco: Expect Prices To Go Up

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Costco Wholesale Corp. (COST) has joined other retailers in warning that the U.S.-China trade war may result in higher prices. On top of that, Costco plans to withstand the proposed tariff increase on Chinese imports in to the U.S. by sourcing some goods from other countries.

Costco's Chief Financial Officer Richard Galanti said Thursday during an earnings call with investors that in response to the proposed tariffs, the company accelerated shipments before certain tariffs went into effect.

Galanti also said that the company met with suppliers to see how they could reduce costs. In addition, the company reduced order commitments on certain items.

"At the end of the day, prices will go up on things. What's interesting is it's hard to predict what the impact is," the CFO said.

Galanti added that despite the tariff price increases, the company saw strength in sales of patio furniture.

U.S.-China trade tensions escalated this month after the Trump administration increased tariffs on $200 billion of Chinese imports to 25 percent from 10 percent. Trump has also threatened new tariffs on the remaining $325 billion of goods imported from China.

However, Costco reported better-than-expected financial results for the recent third quarter. Net income rose to $906 million or $2.05 per share from $750 million or $1.70 per share in the year-ago period.

The latest quarter's results benefited from a non-recurring tax item of $73 million or $0.16 cents per share.

Net sales grew 7.4 percent from last year to $33.96 billion. Comparable sales increased 5.5 percent on a reported basis and was up 5.6 percent on an adjusted basis.

On average, analysts polled by Thomson Reuters expected the company to report earnings of $1.82 per share on revenues of $34.71 billion. Analysts' estimates typically exclude special items.

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