Costco Q1: strong start in China and new ecommerce initiatives

Stewart Samuel
Program Director - Canada

Date : 13 December 2019

Costco’ new financial year saw a continuation of the strong results of the last year. We review its performance and how new ecommerce initiatives and its launch in China have contributed to its growth.

Comparable club sales up 5.0%

Costco’s Q1 net sales increased 5.6% to $36.2bn, with comparable club sales up 5.0%. Canada led the way with comparable club sales up 5.1%. Comparable ecommerce sales increased 5.7%, with the performance negatively impacted by around 20 percentage points due to the timing of the Thanksgiving holiday. Net income increased 10.0% to $844m.

China launch exceeding expectations

These results reflect the enduring strength of Costco’s operating model. Membership income continues to grow, with a renewal rate of 88.4% globally. The retailer has benefitted from new club openings, with a focus on signing new members up as executive members. The retailer’s first club in China has exceeded expectations, with a second club set to open in around 18 months. The retailer has signed-up over 200,000 new members, more than double the average number of members clubs in Asia get to after a couple of years. Costco has also started to bring in some successful items from the club in China to some US west coast locations.

Testing prescription and alcohol delivery

Progress continues to be made with the expansion of its ecommerce business. During the quarter, the retailer launched a test of new prescription delivery service in partnership with Instacart. Also, working with the on-demand delivery service, it has launched an alcohol delivery service in 12 states. It has also launched its online service in Japan and remains on-track to launch its Australian site in the first half of 2020.

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