The Street has a story about how in the summer of 2022, as the consumer spending that typified the pandemic slammed headfirst into inflation and a post-recession mindset, "Walmart and Target both publicly declared that they had warehouses full of the wrong merchandise for the holiday season.
"To fix that, both chains heavily discounted certain items in the late-summer/early-fall period. That wasn't good news for either company's stock as short-term margins took a hit (but it was certainly a good move to build stronger customer relationships).
"And while this problem almost certainly hit many major retailers, few, if any, were as public about it as Walmart and Target (likely to protect their stock prices heading into the holiday season). Costco, it turns out, dealt with some of the same problems and took a fairly extreme step to solve them."
The Street writes that "because Costco has a heavy discount model, it's actually hard to know when discounts exceed the norm. CFO Richard Galanti made it clear, however, that the company did discount excess large inventory during the holiday season during his remarks in the warehouse club's first-quarter earnings call.
"'If you've been online and saw some things we did during not just the week of Thanksgiving and Cyber Monday but we did some -- anywhere from $100 to $500 off on, I think, a $500 cash card if you bought $3,000 or more of these items,' he said.
"Galanti explained that this was about getting rid of some inventory for the same reasons Walmart and Target had to sell items off … Selling off some of those items at a discount makes sense for a chain built around delivering value for members. He also noted that when one area weakens, Costco has other strengths that make up for it."
