Costco off to solid start

Date : 11 December 2013

Costco’s first quarter net sales increased by 5.4% to $24.5bn, with comparable store sales (excluding fuel and currency impacts) up 5.0%. Net income attributable to Costco increased at a slower rate of 2.2% to $425.0m, mainly due to higher than anticipated operating expenses.

Fresh foods among best performing departments

This was another solid performance from Costco overall, although profits grew at a slower rate than sales. In part this reflects the continued investment in IT modernisation as the retailer builds the foundations and capabilities for future growth. From a sales perspective, within consumables, confectionery and fresh foods delivered the standout performances, with produce, meat and deli among the strongest performing fresh categories. It is also worth noting that Thanksgiving fell outside of the quarter this year.

Accelerated international openings supporting membership growth

Costco is accelerating its opening plans this year, with 30 planned for the year as a whole, including its first outlets in Spain. During the quarter, 13 new outlets were opened including nine in the US and two in Australia. The new openings also helped drive an increase in membership income, particularly as there were a greater number of international openings in the quarter compared to the previous year. New international outlets typically perform better in terms of driving new members. Renewal rates remain high, at just under 87% globally, and at over 90% in the US and Canada.

E-commerce investments delivering stronger sale

The retailer continues to make progress with its e-commerce initiatives, with Costco online now available in four countries following launches in the UK and Mexico to support its established operations in the US and Canada. Online sales were up 24% in the quarter, and account for around 2.5% of total sales as it continues to benefit from the launch of its mobile apps, the addition of clothing items and supply chain improvements which enable it to get products to its customers faster.