In his final earnings call as Costco chief financial officer, Richard Galanti got a little feisty and gave the people listening in a look under the hood of the retailer's pricing engine.
It wasn't a massive divergence, as he has always been a pretty straight shooter who answers most questions, but he did go a little deeper than he usually does.
Galanti, who retires on March 15, said during the call that the company had expected inflation of as much as 1%, but the actual number came in lower.
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"We'll now say that in Q2, it was essentially flat. And notwithstanding essentially flat, we're taking price reductions where we can," he said during the membership-based warehouse retailer's fiscal second-quarter earnings call.
"Anecdotally, everything from simple items like reading glasses from $18.99 to $16.99, the 48-count of Kirkland signature batteries from $17.99 to $15.99, a 24-count of Pellegrino from $16.99 to $14.99, and even four pounds of frozen fruit for $14.99 down to $10.99 with new crop pricing."
Galanti has always been open about the impact of inflation and the steps Costco (COST) has taken to mitigate its impact. But he rarely shared specific examples, and later in the call he went into deep detail as to how the warehouse club has increased its sales of big-ticket items.
He was candid and clearly threw some shade at rivals like Walmart, Best Buy. Target, Home Depot and Lowe's.
Image source: Xinhua/Ting Shen via Getty Images
Costco takes a shot at its rivals
Galanti expressed pride in how Costco has improved its digital sales and its delivery business. He noted that many of the chain's big-ticket items are being sold online and delivered by the warehouse club.
"In Q2 of '24 we completed over 1 million deliveries, up 28% versus Q2 a year ago. In terms of e-commerce sales over the past few months, we believe we've done a much better job explaining to our members the significant value propositions we offer compared to traditional competitors in several big-ticket categories," he said.
Costco has specifically made an effort to show customers how it differs from its key rivals when it comes to price transparency.
"Under the 'Why Buy at Costco' banner and the 'Price You See is The Price You Pay' banner, we share with our members what's included in the price of appliances, tires, televisions, computers and mattresses," he said.
Costco shares the full price
Costco's pricing system for big-ticket items is meant to show the full cost of purchase without any hidden fees or charges.
"You can see these online on our website under Why Buy at Costco," he explained.
"Just to give you one example: If you take a four-set of high-end tires compared to a traditional retailer, we include, of course, installation, rotation, balancing and a five-year road-hazard warranty.
Typically there's a lot less road-hazard warranty in other places, or you'd have to pay for extra, ongoing flat repairs, nitrogen, and disposal of the prior tires."
Galanti made clear that Costco isn't just being transparent, it's also cheaper than its rivals in most cases.
"When you put in all the differences of those additional items, it's anywhere from a 15% to 25% savings on any of these items," he added.
The outgoing CFO reiterated Costco's overall pricing strategy.
"We always want to be the first out there trying to lower prices," he said.
"Many new items in sporting goods and lawn and garden are being set with lower prices year over year. And overall — mostly due to reduced freight costs and lower commodity costs versus a year ago. And overall, our inventories and SKUs are in good shape across all channels."
