Costco again proves it's the 'retail poster child for consistency'
Costco on Thursday reported that third quarter net sales rose 12.1% year over year to $31.62 billion, while net sales for the first 36 weeks of fiscal 2018 rose 12% to $95.02 billion.
Total company comparable sales rose 10.2% in the quarter (or 7% excluding fuel sales and currency effects), with U.S. store comps rising 9.7% (7.7% excluding fuel sales and currency effects) and e-commerce comps surging 36.8%, according to a company press release.
Net income for the quarter rose more than 7% year over year to $750 million. Net income for the first 36 weeks of fiscal year 2018 rose nearly 19% to $2.09 billion.
In an economic environment that is lifting many retailers, and in spite of Amazon's primacy online, Costco continues to not just comfortably survive but also grow.
"Costco continues as the retail poster child for consistency, with virtually every metric reflecting strength," Moody's Lead Retail Analyst Charlie O'Shea said in comments emailed to Retail Dive. "From growth in membership fees, improved liquidity, increasing online penetration and high-single digit comp store sales growth, Costco continues to set a high bar in global retail."
Costco customers and employees alike are benefiting from the membership retailer's penchant for sharing its spoils, with lower prices and higher wages. On a conference call with analysts on Wednesday, Chief Financial Officer Richard Galanti said that the company is protected on many sides from pressures like the current increases in freight costs thanks to the cushions from its credit card and membership fees, as well as benefits from last year's tax bill and the closing of several Sam's Club stores, according to a transcript from Motley Fool
"Basically, it's all about sales," Galanti said, adding that "better strong top-line sales lead to improvement in payroll and benefits, and other variable and fixed costs, generally speaking."
Despite worries that Costco might suffer because U.S. consumers would be unwilling to pay up for both an Amazon Prime and Costco membership, its base continues to grow, despite its fee increases. The number of member households rose from 50.4 million at the end of the second quarter to 50.9 million at the end of the third, according to Galanti. Its paid executive member base, a more expensive option, stood at 19 million households, an increase of 199,000 households from Q2.
Costco said it is taking some of its income tax savings in the U.S. to raise hourly wage rates, effective June 11. Its U.S. starting wages will increase from $13 and $13.50 per hour to $14. and $14.50 per hour — a level that continues to outpace the likes of Walmart and Target, despite those retailers' own increases.
After leaving e-commerce mostly alone for years, Costco has recently moved to increase online sales. The retailer is able to keep its margins in line by making only certain merchandise available through its website. Costco is also gaining members, many who live far from a physical location, and sales, thanks to its in-store pickup services. The last has been a surprise, Galanti said. "[W]hen they do come in, a lot of them come in and shop first and then pick it up," he said. "And shop quite a bit, frankly."
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