Firm Profitability under Inflation: Evidence from Costco and Walmart (2019–2025)

Dantong Zhu

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.ACCOUNTING

Faculty Research Mentor: Yu, Huaibing  

Abstract:

Inflation re-emerged as a major macroeconomic challenge in the United States following the COVID-19 pandemic, peaking in 2022 and generating substantial cost pressures for firms. Retailers, in particular, faced rising labor, logistics, and input costs, raising important questions about how inflation influences firm-level financial performance. This study investigates how elevated post-pandemic inflation affected profitability in the U.S. retail sector.Using annual data from 2019 to 2025, this research conducts a comparative financial analysis of Costco Wholesale Corporation and Walmart Inc. Profitability is measured primarily through net profit margin trends across different economic phases, with particular emphasis on the high-inflation period. Inflation data are incorporated to examine how macroeconomic fluctuations corresponded with changes in firm performance.The results indicate that elevated inflation coincided with weaker profitability for Walmart, especially during the peak inflationary years. In contrast, Costco maintained relatively stable net profit margins throughout the period and demonstrated a smoother recovery following the inflation peak. These findings suggest that large retailers may differ in their ability to withstand sustained cost pressures under inflationary conditions.This study contributes to applied finance research by providing evidence on the relationship between inflation and firm performance, offering insights into corporate resilience during periods of macroeconomic volatility.Keywords: Inflation, Profitability, Retail Industry, Net Profit Margin, Financial Performance