What's going on?

Membership-based discount retailer Costco became the latest big-box retailer to report strong quarterly results at the end of last week ��but that�s hardly an exclusive society right now.

What does this mean?

It could be down to government stimulus checks or simply pent-up post-lockdown demand: either way, people are getting out and splashing their cash. Costco�s profit came in 16% ahead of analysts� forecasts � the fifth time earnings have beaten estimates in the past six quarters. Still, that outperformance is nothing unusual: Walmart and Target also reported similarly strong results over the past couple of weeks. Investors� expectations were therefore high � which may be why Costco�s share price actually fell on Friday.

Why should I care?

For markets: Rising prices are a headache for retailers.�

In spite of strong consumer demand, the rising prices of goods and services � i.e. inflation � is causing concern among retail analysts. As inflation increases, so too do costs for the likes of Costco. If a company can�t pass these on quickly enough to consumers via higher product prices, then the higher costs will eat into its profit margin. And seeing as margins for consumer retail companies are already razor-thin compared to most other industries, that could be the difference between making money and losing it.

The bigger picture: Discount retailers do well out of wealth inequality.�

About half of all large US retail chain store opening announcements so far this year have come from discounters Dollar General and Dollar Tree (which also owns Family Dollar). This rapid expansion may be partly due to the country�s growing wealth inequality pushing more Americans towards cut-price shopping. But such stores are also better positioned to withstand ecommerce competition: discounters mostly sell food and daily essentials where delivery probably isn�t worth waiting for. Whatever the reason, more stores could translate into greater future profits for discount retailers.