Costco's Sales Get Another Boost From Pandemic Buying -- Update
September 24 2020 - 6:45PM
Dow Jones News
By Sarah Nassauer
After stockpiling early in the coronavirus pandemic, Americans
continue to turn to Costco Wholesale Corp. to buy bulk quantities
of groceries and cleaning supplies. They have also been loading
carts with home furnishing.
"As people are spending less on travel and dining out they seem
to have redirected some of that spending," said Costco financial
chief Richard Galanti on a conference call Thursday.
The warehouse retailer reported a 14.1% jump in comparable sales
for the quarter ended Aug. 30, excluding gas and currency effects.
On that basis, Costco's growth was nearly twice as high as the
spring quarter when it was struggling with out-of-stock items and
placed limits on shoppers.
"We expected fresh food," paper goods and other items already
selling well early in the pandemic to continue selling, Mr. Galanti
said, "but we were a little surprised in the strength in some of
these non-food, discretionary categories," such as homegoods and
furniture.
Food is selling so fast that profit got a boost from the lack of
loss due to spoilage, he said.
In-stock levels have stabilized, but some items are still hard
to come by in some areas, including disposable gloves and
sanitizing wipes, said Mr. Galanti. Halloween-related sales are
weaker, with a "small reduction in the amount of costumes," he
said. Some people are booking travel through the company again, but
mostly for far in the future, Mr. Galanti said.
Like those at rival Walmart Inc., Costco's stores have largely
remained open throughout the pandemic, as the company was deemed an
essential retailer by government municipalities. Costco has mostly
returned to normal operations with shoppers and workers required to
wear masks since May.
Ecommerce sales nearly doubled in the latest quarter, rising 93%
from a year ago, a big jump for a company that has been slow to
embrace online sales and has built its business around bulk
packages. Same-day fresh food delivery has more than tripled, said
Mr. Galanti. "There are some people who are not going into the
supermarket."
Both Walmart and Costco have ramped up their grocery delivery
options. While Walmart has built its own delivery and pickup
services, Costco has mostly turned to Instacart Inc., which pays
people to shop and deliver items.
Company executives believe Costco is picking up business from
retailers that are closed or that don't sell items that people are
buying more of amid the pandemic, such as food and homegoods, said
Mr. Galanti. "We are retaining more of their dollars."
Costco, which operates 795 stores in the U.S, Canada and a few
other countries, has also resumed services that were temporarily
halted, such as its optical counters and food courts.
Costco is benefiting from stronger consumer spending among its
generally wealthier core shoppers, analysts say. Costco shoppers
pay a $60 or $120 annual membership for access to bulk products
often sold at lower prices than at competitors, which tends to draw
wealthier shoppers.
Costco's total revenue for the most recent quarter was $53.38
billion, 12% higher than a year ago, beating analysts' expectations
of $52.11 billion.
Profit was $1.39 billion, or $3.13 a share. In the comparable
quarter a year ago, Costco had a profit of $1.1 billion, or $2.47 a
share. Covid-19 premium wages and sanitation expenses hit earnings
by 47 cents a share, or $281 million, before tax.
--Allison Prang contributed to this article.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
September 24, 2020 18:30 ET (22:30 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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