We look at Costco’s March sales update and the impact of customers stocking-up during the Coronavirus (Covid-19) pandemic.
Strong growth across all regions
Costco reports its sales performance each month, with very little change on a month-to-month basis. However, the pandemic had a significant impact in March. For the five-week period from March 2 to April 5, total sales increased 11.7% to US$15.5bn.
On a comparable club basis, excluding the impact of exchange rate movements and fuel, sales were up 12.3%. This comprised of growth of 12.1% in the US, 7.2% in Canada and 19.2% across its other international markets. Ecommerce, which is mainly a delivery driven business, sales increased 49.8%.
Traffic impacted by measures to support physical distancing
Building on the strength it saw in the last week of February, the retailer saw continued sales and traffic growth through to the mid-point of the month. Growth slowed as the retailer began to make operational changes, including limiting the number of members in clubs, shortening opening hours and closing some departments, such as optical and hearing. The retailer also limited the offer in its food courts and in some regions had to stop selling non-essential items.
Growth in food, slowdown in non-food
In the US, the strongest sales growth was seen in Texas, the north-east and mid-west. Internationally, Taiwan, the UK and Australia were the best performing markets. Sales in food and sundries were up in the mid-30%, while softlines were down in the mid-20%.
Reliant on small business owners
Costco’s experience reflects that of most retailers; strong growth through to the middle of March, which tailed off as mandatory isolation measures were put in place, limiting traffic to its clubs. However, with a membership base that also comprises small business owners, it may be more susceptible to temporary business closures compared to conventional food retailers. A large non-food business may also be impacted if members start to cut-back on discretionary spending against a backdrop of significantly slower economic growth and high unemployment.
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