Costco delivered another solid quarter. We look at the drivers behind its performance and ecommerce development plans.
Strong traffic and membership trends
Costco’s second quarter total revenue increased by 7.3% to $35.4bn. Comparable store sales increased 6.7%, excluding the impacts of currency, fuel and an accounting change concerning revenue recognition. Net income rose 26.8% to $889m. The retailer benefitted from strong traffic trends, up 4.9% globally and by 5.2% in the US. Its membership renewal rate continued to improve, coming in at 88.3% versus 88.0% at the end of Q1. Both these metrics highlight the continued appeal and robustness of Costco’s proposition.
Source: IGD Research
Ecommerce sales up 25.5%
Ecommerce sales continued to grow strongly, up 25.5%. Much of this is being driven from the US, including through its same-day delivery partnership with Instacart. This service is available to almost all of its members in the US. Later this year, it will launch ecommerce operations in Japan and Australia.
Building out its ecommerce infrastructure
To support its ecommerce business, the retailer continues to build out its infrastructure, recently opening its first fulfillment automation operation within an existing DC for small ecommerce packages. Two further facilities will be developed this year. Costco is also in the process of moving the fulfillment operations of its two-day grocery service from 10 of its business centres. This work will be undertaken by six DCs. It is also extending its test of pickup lockers for small, high value items.
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