We review Costco’s second quarter performance, as it continues to set the pace among global retailers.
Comparable club sales up 7.9%
Costco’s net sales increased by 10.5% to $38.3bn in Q2, with comparable club sales up 7.9%, excluding fuel and currency impacts. The retailer saw strong growth across its global operations, with comparable sales up 8.1% in the US, 6.8% in Canada and 7.1% in other international markets. Operating income over the period increased 5.2% to $1.3bn. Costco benefitted from strong traffic growth, up 5.9% worldwide and 6.1% in the US, while the global membership renewal rate came in at 88.4%. These statistics demonstrate the compelling nature of the retailer’s model.
Ecommerce sales up 28.0%
The retailer’s ecommerce operations continue to grow at pace, up 28.0% in the quarter. This business benefitted by the timing shift of the holidays, with seasonal, toys and housewares categories leading growth. Recently, Costco launched ecommerce operations in Australia and Japan.
Coronavirus concerns driving traffic in February
Commenting on current trading, the retailer pointed to the uptick in traffic growth in February. Traffic was up 9.2% globally in the month, with the final week of the month particularly strong given that average traffic growth for the first three weeks was 7.6%. This is an area that the retailer is watching carefully, including the impact on its people, operations and its global supply chain.
Demand out-stripping supply
Costco has seen strong demand for cleaning supplies, water, paper goods, hand sanitizer, sanitizing wipes disinfectants, water filtration systems and food storage items. In some areas, it has been challenging to fully meet demand. Within its warehouses, it has also enhanced its cleaning and sanitizing protocols.
Supply chain complexity
In terms of its supply chain, many of its supplier factories experienced extended closures coming out of the Chinese New Year. It has also experienced port and trucking issues and challenges in exporting private label products to some of its global markets. Its travel business has also seen reduced demand and higher cancellation rates. However, production levels are starting to improve, with the retailer not expecting any long-term impacts on products imported from Asia.
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