Costco Wholesale CFO Richard Gallanti talks about competition and deflation

On the Call: Costco Wholesale CFO Richard Galanti

As consumers have limited their spending, retailers have become increasingly competitive to lure them into their stores — typically focusing on value to draw the cost-conscious. At the same time, retailers are seeing prices drop on some items as manufactures adjust to lower demand, lower input prices and other factors.

Costco Wholesale Corp. Chief Financial Officer Richard Galanti discusses how competition and deflation will affect his company in the coming year on a conference call with investors Wednesday.

QUESTION: Can you just talk about how the competitive environment and also the impact of deflation has affected planning for the upcoming fiscal year?

RESPONSE: Last one first. Deflation is continuing. We all know on the consumer products side it started back in April-May. And we had big items, paper goods, a lot of branded consumer products items as well. Part of that deflation related to the fact that more penetration is going to private label, which tends to be 20 and 30 percent lower price points. So we see that continuing. … When talking to the food and sundries people here, to the extent that there’s been some price point or deflationary pricing from the manufacturers, it’s not like there’s another one coming three months later for that same item.

We’ve gotten some big stuff out of the way. My guess is a that it will be less — a little less impactful, but still in that direction over the next few months.

In terms of competition. We’re all still pretty tough. There’s a handful of big boxes, of course, notably Sam’s and Wal-Mart, and B.J.’s to some extent, and we’re out there being tougher, and we don’t see it getting more competitive but it’s not like anything has lightened up a lot, either.