Costco among retailers cutting grocery prices

Deal-seeking shoppers are spurring Costco and other retailers to cut some grocery prices in a bid to remain competitive.

Costco, which has eight warehouse clubs on Long Island, cut prices on eggs and beef, as well as on some products of its store brand, Kirkland Signature — chicken wings, chocolate almonds, golf balls and sheets — during its fiscal third quarter, the company recently reported.

Costco, headquartered in Issaquah, Washington, joins Stop & Shop, Walmart, Kroger and other grocery sellers in cutting prices, as consumers spend a growing share of their food dollars at deep-discount stores, such as Dollar General and German grocer Aldi.

Costco aims to be a price leader for its customers, and because of rising gas prices, "we felt it was important to continue to deliver more value for our members,” Gary Millerchip, Costco’s executive vice president and chief financial officer, told analysts during an earnings call May 28.

Not only are retailers paying more to acquire merchandise, but also more of them are eating those higher costs to try to hang on to their market share as consumers look for better deals, said Brett Husslein, equity analyst at Morningstar Research Services LLC, a financial services firm in Chicago. 

During its fiscal third quarter, which ended May 10, Costco cut prices on four Kirkland Signature products, Millerchip told analysts.

The Kirkland Signature products price cuts were on crispy wings, reduced from $16.99 to $14.99; milk chocolate almonds, from $19.99 to $18.99; golf balls, from $32.99 to $29.99; and king size sheets, from $89.99 to $79.99, he said.

Those reductions were in addition to lowered prices on several "everyday items," such as eggs and beef, he said.

Costco did not respond to Newsday’s request for comment.

The retailer’s net income in the third quarter this year was $2.19 billion, compared with $1.90 billion in the period last year.

The sales increase for the quarter was primarily due to Costco selling more gasoline, as well as price inflation and customers buying more items per basket, Husslein said.

Fuel, grocery prices surge amid war

Nationwide, grocery prices have soared in recent months, due mostly to the war in Iran, which began Feb. 28 and is disrupting fuel shipping through the Strait of Hormuz, experts said. The fuel blockade has caused an increase in the price of crude oil.

On Monday, crude oil, which is used to produce diesel, gasoline and other fuels, closed at $94.25 per barrel, up 30% from $72.48 on Feb. 27. Its price peak during that 14-week period was $118.35 a barrel, on March 31.

Diesel fuels the trucks that transport food and the machinery used on farms, while petroleum byproducts are used to produce fertilizer.

In April, the consumer price index, a measure of inflation, showed grocery prices in the 25-county region that includes Long Island were 5.9% higher than they were in the same month last year, the biggest annual increase since April 2023, when prices rose 6.1% from the previous year, according to the U.S. Bureau of Labor Statistics.

Retailers’ price cuts could affect profit margins but they will make them more appealing to customers if the cost-cutting is well-publicized, allowing the stores to take credit for it, said Jon Hauptman, founder of Price Dimensions, a Chicago-based pricing adviser for supermarket chains. 

Warehouse clubs and traditional supermarket chains are becoming more creative to remain relevant in today’s retail landscape because more discounters and specialty grocers are competing now than in the past, he said.

“I think today’s marketplace has fundamentally changed. And we’re never going to see traditional grocery stores with 90% of the market share like they had 20 years ago," he said. 

Walmart, a discounter that is the largest grocer nationwide, has a 19.9% grocery market share, down from 20.4% in 2024, while Kroger, the nation’s second-largest grocer, saw its market share fall from 8.8% to 8.3% during the period, according to Numerator, a Chicago-based market research firm.

Costco is the third-largest grocer in the nation, where its market share has risen from 7.6% to 8.2% over the last two years.

The only other warehouse club on the top 15 list is BJ’s Wholesale Club, whose market share fell from 3.7% to 3.5% in the period.

Among the grocers cutting prices is Stop & Shop, the largest grocer on Long Island. The Quincy, Massachusetts-based retailer announced last month that it had lowered prices between 5% and 35% on thousands of products at 150 supermarkets in New Jersey, southern Connecticut and New York, including its 46 stores on Long Island.   

Stop & Shop cut prices at its stores in Rhode Island, Massachusetts and most of Connecticut in 2024 and 2025.

The biggest issue hurting Stop & Shop’s competitiveness is its prices, as consumers contend with the financial challenges of higher gas prices, cuts in government aid benefits and other affordability issues, the chain's president, Roger Wheeler, told Newsday in May. 

Walmart Inc. has cut prices on 7,200 products, an increase of more than 20% from last year, John David Rainey, executive vice president and chief financial officer for the Bentonville, Arkansas-based retailer, told analysts during an earnings call in May.  

Greg Foran, the new CEO of The Kroger Co., told Bloomberg in May the Cincinnati-based company was planning price cuts, the publication reported.  Kroger does not have any stores on Long Island.