COSTCO CELEBRATES Q3 SALES UP MORE THAN 20%

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Despite facing tough like-for-like sales from last year, Costco has reported that its third quarter sales increased by more than 20%.

Costco said that total sales were up 21.5% to €37.2bn, like-for-like sales (ex-fuel and currency impacts) were up 15.1%. The company said that like-for-like sales were up 15.2% in the US, 16.7% in Canada and 13.1% in other international markets; e-commerce like-for-like sales were up 38.2%.

Stewart Samuel, Program Director, Canada at RetailAnalysis, said: “Delivering growth-on-growth is not remarkable on its own, but what makes Costco’s performance stand out is the rate of growth it is delivering. The sales increase of 21.5% builds on an increase of 7.8% in Q3 last year, helping to deliver a two-year stacked growth rate of 30.3%. 

“Over the same period, it has only opened 36 new clubs. Costco continues to benefit from elevated at-home demand, coupled with the opening of foodservice and other businesses. Its unqiue member base enables it to tap into both these opportunities. 

“Although a small part of its operations, it is seeing strong demand within its travel business, reflecting increased mobility in the US. E-commerce also continued to grow strongly, with around 45% of US members having used one of its services. The retailer is also seeing stronger renewal rates from these members.”

Improved logistics capabilities helping to reduce prices
Costco’s e-commerce growth is also supported by its acquisition of Innovel, rebranded as Costco Logistics, 12 months ago. During the quarter, this service fulfilled around 70% of big and bulky ecommerce orders in the US. 

Samuel said: “Bringing this service in-house enables the retailer to expand its range of large items, work with a broader range of suppliers and switch from a drop-shipping model to direct imports for some items, speeding up delivery and lowering prices for shoppers.”

Cost inflation driving higher consumer prices
Inflation remains front of mind for Costco, estimating that selling price inflation is in the 2.5-3.5% range. Several factors are driving this including higher labour and freight costs, increased transportation demand, container shortages and port delays and higher commodity prices. 

Samuel said: “Many suppliers have reported paying up to double for containers and shipping, while price increases in pulp, plastic and resin, and metals are impacting consumers products such as paper goods, garbage bags and canned beverages. 

“In fresh, beef prices are up 7% year-on-year, reflecting both higher labour and transportation costs and stronger demand as restaurants start to reopen.”

Sampling activities and food courts returning
Two of the most eagerly anticipated elements of the Costco proposition will return in June, its food sampling activities and food courts. 

Samuel said: “Both were significantly impacted by the pandemic. It is planning a phased return to full sampling, with 170 of its US locations activated in the first week of June, with the remaining locations returning towards the end of the month. 

“Increased safety protocols will be in place, including all samples prepared in smaller batches behind plexiglass. Food courts, which have been operating with a restricted menu and takeout only model for most of the last year, have recently started to add back seating at outdoor locations and introduced more menu items. A phased approach to full opening will apply here too.”

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