We review Costco’s second quarter results as it starts to lap last year's surge in demand driven by the Covid-19 pandemic.
Key numbers Q2:
- Net sales increased 14.7% to $43.9bn
- Comparable store sales (ex-fuel and currency impacts) increased 12.9% across the company, and by 12.6% in the US, 10.6% in Canada and 17.7% in other international markets
- Ecommerce sales increased 74.8%
- Operating income increased by 5.8% to $1.3bn
All eyes on March
Costco continues to power ahead, making gains in traffic and basket spend, up 1% and 11.9% respectively, year-on-year. Its already strong membership renewal rate edged up marginally to 88.5% in the quarter, while it also gained 600,000 new households over the quarter. The retailer is one of the first to report trading numbers against the start of the pandemic-driven surge in demand last year. Sales in the final week of February were lower as it came up against a strong week from a year ago, impacting the month by around 3.5 percentage points. Comparable traffic in February was flat to last year globally. With March also strong last year, the retailer’s monthly results will be eagerly anticipated.
Covid-19 trends continue
The pandemic continues to drive elevated demand, and while product availability has remained strong, it has seen some supply chain challenges. These have been related to container shortages and port delays and have impacted non-food categories and some food categories including seafood and imported cheeses and oils. Demand remains strong for televisions, computers, smart home related items, exercise equipment, bikes and outdoor activity items, lawn and garden items and appliances.
Curbside pickup pilot exceeding expectations
Ecommerce growth was driven by several departments, including pharmacy and OTC, garden and patio, health and beauty and consumer electronics. Online grocery grew at a “very strong rate,” with its same-day delivery programme up 450% year-on-year. The pilot of curbside pickup is on-going with basket size surpassing the company’s expectations. Costco continues to track the pilot and build more efficiencies into the process.
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