Pandemic Shoppers Crowd Costco's Website

Gina Acosta
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Pandemic Shoppers Crowd Costco's Website
In April Costco imposed a rule mandating that all shoppers wear face coverings in-store.

The most unusual fiscal quarter Costco has likely ever seen produced robust same-store sales amid shopping restrictions in-store, and a massive spike in online sales as many consumers stayed home.

The club retailer reported an 8% increase in same store sales for the third quarter ended May 10. But the most impressive metric this quarter was e-commerce sales rising a stunning 66.1%, a record for the company. Net sales for the quarter increased 7.3%, to $36.45 billion from $33.96 billion last year. Net sales for the first 36 weeks of the fiscal year increased 7.8%, to $110.94 billion from $102.90 billion last year.

Net income for the third quarter was $838 million, or $1.89 per share, which was negatively impacted by $283 million pretax, or 47 cents per diluted share, from incremental wage and sanitation costs related to COVID-19. Last year's reported third quarter net income was $906 million, or $2.05 per diluted share, which included the benefit of a non-recurring tax item of $73 million, or 16 cents per share.

Net income for the first 36 weeks was $2.61 billion, or $5.89 per diluted share, compared to $2.56 billion, or $5.79 per diluted share, last year.

During an earnings call with analysts, Costco CFO Jack Galanti said the company would be bringing back sampling in-store after suspending it in March.

“We're going to start doing some things in mid-June on a slow rollout basis in sampling,” Galanti said. “I can't tell you anymore, but needless to say it’s not going to be where you go and just pick up an open sample with your fingers."

Costco said its fresh food gross margin percentage was up during the quarter. "Just looking at fresh foods and the food items of what we call food and sundries, it's it's been way up, particularly in fresh foods and somewhat and the rest," Galanti said.

In April Costco reported net sales of $15.49 billion for the five weeks ended April 5, an increase of 11.7%. The club retailer also reported a same-store sales increase of 12.1% excluding the impact of gas prices. For the 31 weeks ended April 5, the company reported net sales of $96.25 billion, an increase of 9% from $88.29 billion during the similar period last year.

In a telephonic monthly sales update in April, Costco said its fresh food sales were up in the mid-20s percentage range, propelled by meat and produce sales. Sundries were up in the mid-30s range. 

Costco also achieved a 49.8% increase in e-commerce sales in March.

In February, COVID-19 related sales helped Costco post 11.7% increase in same-store sales for the month.

In its second-quarter fiscal report, the company said that February sales benefited from an uptick in coronavirus-related consumer demand in the fourth week of the reporting period. 

"We attribute this to concerns over the coronavirus and estimate the positive impact on total and comparable sales to be approximately 3 percent," the retailer said.

Astonishingly, the comp increase could have been even higher, but the retailer has struggled to keep some products in stock in some markets. Company leaders said at the time that the most popular items flying off shelves in the past few weeks include shelf-stable dry grocery items, cleaning supplies, Clorox and other bleaches, water, paper goods, hand sanitizers, sanitizing wipes, disinfectants, health and beauty aids, and even items like water filtration and food storage items. In response, Costco has placed purchase limits on certain items, depending on supply.

Issaquah, Wash.-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 retailers in North America, also has e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea and Taiwan.

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