Costco cuts time to make returns
By Dow Jones / The Associated Press
DALLAS — In a break with its policy of allowing customers to return goods at any time for a full refund, Costco Wholesale is setting a firm return period of 90 days for consumer electronics.
The previous policy had hurt the Issaquah-based retailer's profit.
Costco on Monday introduced the revamped policy in its 109 California warehouses, and it plans to debut the changes in the rest of its 371 U.S. locations within the next five weeks, Chief Financial Officer Richard Galanti confirmed.
In general, Costco allows its customers an unlimited grace period to return purchases for a full refund. The only exception was a six-month deadline after the date of purchase for returning desktop computers. That unlimited timeframe still applies to Costco merchandise other than consumer electronics. Electronics goods purchased before the new 90-day policy goes into effect can be returned at any time.
Televisions, computers, cameras, camcorders, iPods, MP3 players and cellphones will fall under the new policy. Those products represented about 5 percent — or roughly $3 billion — of Costco's $59 billion in sales from its fiscal year ended Sept. 3.
In turn, Costco will extend the manufacturer's warranties on TVs and computers to two years from one.
"Our view is, even with these changes, we still have the best return policy in the retail industry," Galanti said, adding that Costco does not impose a restocking charge on returned items.
Returns of consumer electronics — flat-panel televisions, in particular — put a squeeze on Costco's profit margins in its latest fiscal year. Costco has posted strong sales of the TVs, including a 50 percent rise in November at stores open for at least a year, but it has seen many come back to its stores as customers encountered difficulty installing them at home.
The policy of allowing a full refund of the purchase price also allowed for some opportunism, as prices on flat-panel TVs have fallen precipitously in the past year.
"Some of our customers have been essentially trading up," said Jeff Elliott, Costco's finance director.
JP Morgan Securities analyst Charles Grom estimates that returns of consumer electronics pared 8 cents a share from Costco's earnings last year, when Costco reported earnings of $2.30 a share.
Shares of Costco slipped 7 cents to $57.40 Monday.
Information supplied by Costco's Elliott was reported by Bloomberg News.