Costco Same-Store Sales Rise After String of Declines -- Update
December 07 2016 - 8:10PM
Dow Jones News
By Sarah Nassauer and Ezequiel Minaya
Costco Wholesale Corp. said discounts and deflation erased much
of the sales gains the company logged in its latest quarter, as the
retail giant battles with Wal-Mart and Amazon.com for a bigger
slice of consumer spending.
Costco, the second largest retailer in the U.S. by revenue, said
more shoppers headed to its warehouses in the period, but lower
prices on everything from food to electronics left the company with
just a 1% increase in same-store sales.
For example, unit sales of TVs rose 17% in the busy November
holiday shopping period, but just 2% in dollar terms, said finance
chief Richard Galanti on a conference call Wednesday with
investors. Meat sales rose 16% in pounds and 6% in dollars. "We're
going to invest in loyalty and growth while it's raining on
everybody as it relates to higher levels of deflation," he
said.
Excluding the impact of the strong dollar and lower gas prices,
same-store sales rose 2% in the quarter ended Nov. 20. Traffic
increased 2.2%, but was "choppy," slowing the week of the
presidential election, said Mr. Galanti.
The latest results come amid the relatively upbeat outlook for
the holiday season among some of the biggest players in the
challenged retail sector. Macy's Inc. and Kohl's Corp. have posted
optimistic outlooks for the crucial holiday season, despite more
long-term struggles with changing shopping habits and competition
from discounters. Last month, Wal-Mart Stores Inc. also chimed in
with the expectation that consumer spending would remain solid
during the holidays.
Much of the sector has struggled to keep pace with Amazon.com
Inc. which has e-commerce sales greater than the combined
e-commerce sales of the next 20 U.S. retailers, Costco among them.
At the same time, deflation is taking a bite out of many retailers'
sales. Last week, Kroger Co. cut its profit guidance for the full
year, saying lower prices on eggs, meat and other food are
tempering sales.
Costco's online sales in the fiscal first quarter rose 8%, a
slower rate than the overall e-commerce market. The Seattle-based
retailer has been more blunt than competitors that it prefers
shoppers to come to stores where impulse purchases are more likely.
Still, it's working to be stronger online, say executives. "We
think we could and should do a lot more online," said Mr.
Galanti.
Asked how much of the company's sales are imported and thus
potentially subject to import tariffs under a Donald Trump
administration, Mr. Galanti estimated about 25% of sales come from
imported goods. But it's "tenuous to come up with an exact number,"
he said. For example "most electronics are purchased in U.S.
dollars by U.S. trading companies that are arms of the overseas
manufacturer," he said.
For the quarter, Costco reported a profit of $545 million, or
$1.24 a share, up from $480 million, or $1.09 a share, a year
earlier. Total revenue rose 3.2% to $28.1 billion, while membership
fees climbed 6.2% to $630 million.
The latest period benefited from a $51 million legal settlement
that contributed 7 cents a share to earnings, the company said.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Ezequiel
Minaya at ezequiel.minaya@wsj.com
(END) Dow Jones Newswires
December 07, 2016 19:55 ET (00:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Sep 2023 to Sep 2024