Costco Q4: ecommerce strength underpins business performance

Stewart Samuel
Program Director - Canada
@RetailAnalysis

Date : 08 October 2018

We review Costco’s fourth quarter performance, including the continued growth of its ecommerce business.

Costco: the key numbers

  • Costco’s fourth quarter total revenue increased by 5.0% to $44.4bn
  • Over the period, comparable store sales, excluding currency and fuel impacts, increased by 7.2%
  • Net income increased 13.5% in the quarter to $1.0bn
  • For the full year, total revenue increased by 9.7% to $141.6bn. Net income over the period increased 17.0% to $3.1bn

Visit frequency up in all markets

Costco continues to out-perform its wholesale cub peer group, while its comp sales performance was ahead of most major retailers in the US. Visit frequency was up 4.9% across all markets, reflecting, in part, continued range enhancements in grocery. The retailer has been expanding its fresh food offer and adding more speciality, natural and organic items.

Source: IGD Research

Ecommerce sales up 26%

The business continues to see significant strength with its ecommerce business, with sales up 26.2% in the quarter and up 32.2% for the full year. It is benefiting from both system and operational improvements, range enhancements and its partnership for grocery ecommerce delivery with Instacart in the US.

Costco is also slowly expanding its store pickup programme, adding more electronics items. It has seen a positive benefit from customers using this programme, with over half also making an in-store purchase when picking up their items. Ecommerce sales currently represent just over 4% of the business. The retailer will continue to invest in the infrastructure to support this channel, including its two-day shipping programme.

Taking action to mitigate impact of tariffs

US tariffs remain top of mind for the retailer. It is taking several actions to mitigate their impact. These include accelerating shipments before they go into effect, working with suppliers to reduce costs, reducing volumes on some items and sourcing from alterative countries where possible. Costco is also able to take advantage of lower US pricing on some items which have been impacted by Chinese tariffs.

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