Costco CFO flags shift to budget buys as shoppers tighten belts

Costco’s finance chief has offered a subtle warning to the broader retail industry: higher-income shoppers are hunting for bargains too—and the shift is showing up in the cart.

Speaking during the company’s second-quarter earnings call, CFO Gary Millerchip pointed to strong growth in big-ticket items and everyday essentials alike, while highlighting an emerging shift in consumer habits that could spell trouble for rivals like Walmart and Target.

“Our buyers continue to bring in new and exciting items at great values. This included big-ticket consumer electronics products such as 98-inch and 100-inch TVs, Stern pinball machines, and gaming computers, all of which performed very well during the holiday season,” Millerchip said on the call.

For the quarter, categories like gold and jewelry, gift cards, toys, housewares, and appliances all posted double-digit gains. Those headline items have helped Costco maintain its value proposition—particularly as it leans into its growing base of higher-income members.

But it’s in the grocery aisle that Millerchip sees a trend worth watching.

“Fresh in Q2 was up high single digits. This was led by double-digit growth in meat where we continue to see a shift toward lower-cost proteins such as ground beef and poultry,” he said.

In other words, even Costco’s more affluent customers are trading down.

That consumer recalibration is less of a threat to Costco’s bottom line than it would be for competitors. The warehouse club generates the lion’s share of its profits from membership fees—$65 for Gold Star and $130 for Executive—rather than product margins. As long as renewal rates stay high (they’re currently above 90% in the U.S. and Canada), the model holds.

Still, Millerchip’s commentary suggests that price sensitivity is becoming more acute—and that Costco intends to meet it head-on.

“Our goal is always to be the first to lower prices where we see opportunities to do so and the last to increase prices in the face of rising costs,” he said, a statement that reflects Costco’s long-standing pricing discipline.

He cited several price reductions rolled out during the quarter: Kirkland Signature Refined Olive Oil (3L) dropped from $29.99 to $27.99; Organic Peanut Butter was reduced from $11.49 to $9.99; and Tortilla Strips went from $5.69 to $4.99.

The company is also ramping up local sourcing efforts to further contain costs, introducing a China-produced purified water SKU under its Kirkland label during the quarter.

The message for the rest of the retail sector is clear: price wars may be inevitable, and Costco has the balance sheet—and member loyalty—to go the distance.

“Bakery and produce also performed well this quarter,” Millerchip added. “Food and sundries had low- to mid-single-digit comps, with cola and international foods showing the strongest results.”

It’s a reminder that while consumer tastes may fluctuate, Costco’s strategy is designed for durability. The CFO’s comments also serve as a broader signal: in an inflation-stretched economy, value is not just a low-income concern—it’s a cross-demographic imperative.

For CFOs elsewhere, the takeaway is more than competitive pricing. It’s about anticipating the downstream effects of changing consumer sentiment—and the operational agility required to respond.

Because when even Costco’s best customers start tightening their belts, it’s not just about what’s in the basket—it’s about who’s still shopping.

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