Costco Boom Shows No Signs of Slowing

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Costco Boom Shows No Signs of Slowing

By Gina Acosta - 09/24/2020
Costco Boom Shows No Signs of Slowing
Shoppers are regularly hitting the fresh produce, appliances, sporting goods and furniture aisles at Costco, despite the pandemic.

Costco Wholesale obviously doesn't need curbside pickup to generate impressive sales and profit.

The club retailer has reported fourth-quarter and year-end results showing that plenty of American consumers are regularly shopping the fresh produce, appliances, sporting goods and, interestingly, furniture aisles in person at Costco, despite the pandemic.

“As people are spending less on travel and dining out, they seem to have redirected some of that spending,” said Costco CFO Richard Galanti in an earnings call on Thursday, Sept. 24. "We were a little surprised in the strength in some of these nonfood, discretionary categories, such as home goods and furniture." He added that Halloween-related sales have been weaker this year, and that customers are booking travel through the company again, but mostly for far in the future.

For the fourth quarter, U.S. same-store sales excluding gasoline and currency fluctuation rose 13.6% in the fourth quarter ended Aug. 30. Membership-fee income was up 5.3%, to $1.11 billion.

According to data from Los Altos, California-based Placer.ai, store traffic at Costco was up 10% at the beginning of September from 2019 levels.

On Thursday, Galanti told CNN that the company is looking at [pickup], but hasn't "decided to do it at this point. We don't see a lot of members asking for it. And we do offer other alternatives." Other club and food retailers have been rushing to add online grocery delivery and pickup options as many consumers continue to stay home due to the pandemic. 

Costco did pull in great e-commerce metrics for the quarter: E-commerce was up 91.3%.

Net sales for the quarter increased 12.5%, to $52.28 billion, from $46.45 billion last year. Net sales for the fiscal year increased 9.3%, to $163.22 billion, from $149.35 billion last year.

Net income for the fourth quarter was $1.389 billion, or $3.13 per diluted share, compared with $1.097 billion, or $2.47 per diluted share last year. This year’s fourth quarter was negatively affected by incremental expense related to COVID-19 premium wages and sanitation costs of $281 million pretax (47 cents per diluted share) and a $36 million pretax charge (6 cents per diluted share) related to the prepayment of $1.5 billion of debt. These items were partly offset by an $84 million pretax benefit (15 cents per diluted share) for the partial reversal of a reserve of $123 million pretax (22 cents per diluted share), related to a product tax assessment taken in the fourth quarter of last year.

Net income for the fiscal year was $4 billion, or $9.02 per diluted share, compared to $3.66 billion, or $8.26 per diluted share, in the prior year.

In August, the company bought a former Barnes & Noble store in the Issaquah, Washington, area to expand its corporate capacity. Costco SVP of Real Estate Dave Messner told the Puget Sound Business Journal that the transaction concerned 1.5 acres for a future headquarters expansion.

There are no immediate plans to demolish the Barnes & Noble building at 1530 11th Ave. N.W. "I think we'll use the existing building for additional corporate capacity," Messner said.

Costco has been buying up other properties as it looks to expand its headquarters office space. According to the Journal, Costco's current campus has about 529,000 square feet of office space. 

Issaquah-based Costco operates 787 warehouses worldwide, including 543 in the United States and Puerto Rico. The company, which is No. 5 on Progressive Grocer’s 2020 PG 100 list of the top food and consumables retailers in North America, also has e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea and Taiwan.