Dive Brief:
Costco Wholesale CEO Ron Vachris said Thursday that the company was committed to flowing any tariff refunds it receives back to its customers. The comments come in the wake of the Supreme Court decision last month invalidating President Donald Trump’s use of the 1977 International Emergency Economic Powers Act to give him the authority to impose broad tariffs globally.
“As we’ve done in the past, when legal challenges have recovered charges … our commitment will be to find the best way to return this value to our members through lower prices and better values,” Vachris said on the company’s earnings call, according to a Seeking Alpha transcript. “We’ll be transparent in how we plan to do this, if and when we receive any refunds.”
Vachris dove right into tariffs at the top of the call that came one day after the U.S. Court of International Trade directed U.S. Customs and Border Protection to remove defunct tariffs. The levies are of “great interest” to Costco’s customers and shareholders, he said, noting that the situation remained “extremely fluid” as the IEEPA tariffs have been replaced with new tariffs that will be in place for “at least the next 150 days.”
Dive Insight:
In late November the Issaquah, Washington-based company sued the Trump administration seeking a declaration that the IEEPA levies were unlawful and asking for a “full refund.” Costco was one of a number of companies seeking refunds through the courts, including Revlon Consumer Products and Bumble Bee Foods, with FedEx one of the bigger names to file suit after the Supreme Court ruled on the matter.
The road to refunds could be a long bumpy one. CIT Senior Judge Richard Eaton on Wednesday ordered the CBP to liquidate unprocessed entries on U.S. imports and reliquidate those that have been processed but not finalized. Liquidation is essentially the finalization of the total tariff amount owed. The CBP on Friday told Eaton that it will not be able to comply with the order to begin refunding reciprocal tariffs, according to court filings.
During the earnings call Vachris emphasized the complexity and uncertainty that continues to surround tariffs and the refund process, stating that it was “not yet clear what the process will be, what refunds, if any will be received and when this will happen.” But he said the company is well positioned to manage the impact “as well as anyone” through its ongoing tariff mitigation strategy that includes limiting the number of stock keeping units or products, and sourcing more products domestically where it has more control of the supply chain.
“We will continue to be a pricing authority and as some tariffs have been reduced, we are lowering prices on affected items such as certain textiles, bedding and cookware SKUs,” Vachris said.
The uncertainty that the company faces isn’t only related to tariffs. CFO Gary Millerchip said that inflation in its latest quarter decreased slightly in food and sundries, led by deflation in produce, eggs and dairy while that trend was partially offset by slightly higher inflation in non-food items which were impacted by tariffs in some areas. He also noted that the war in Iran could impact inflation.
Inflation “was slower in the second quarter, trending towards sort of low single digits, I guess,” Millerchip said on the call. “Now I’ll caveat that…that was Q2. Obviously, the world has changed a little bit since we gave that update, and so we’ll have to see how things play out with the situation in the Middle East.”
In its fiscal second quarter ended Feb. 15 Costco reported its net income rose to over $2.04 billion from about $1.8 billion in the year-earlier period on net sales that rose 9.1% year over year to $68.24 billion.