Costco posts increased sales to end fiscal year, will limit purchases of 2 products

Costco Wholesale reported increased sales for its fourth quarter last week, citing a large increase from last year. But despite the growth in sales, the warehouse retailer will be putting purchasing limits on items from its private label Kirkland line like water and toilet paper to avoid shortages.

With the limits, Costco is attempting to keep supply steady heading into fall and winter amid the spread of the COVID-19 Delta Variant. The move comes after customers complained online about shortages of essential items.

Costco said it is experiencing port delays, higher labor and freight costs, and shortages on critical aspects of commerce like shipping containers, trucks and drivers to various components, and raw materials and ingredients, causing most of its general items to sell out within only a couple weeks.  

Richard Galanti, CEO of Costco, which operates 809 warehouses worldwide, said fresh food inflation "is up in the mid to high single digits, with meat leading the way, up high single to low double digits due to feed, labor and transportation costs."

Despite the recent challenges, Costco ended its fiscal year on a strong note, with net sales in Q4 increasing 17.5%, to $61.44 billion from $52.28 billion last year. Net sales for the fiscal year increased 17.7%, to $192.05 billion from $163.22 billion last year.

Net income for the fourth quarter was $1.670 billion, or $3.76 per diluted share, compared to $1.389 billion, or $3.13 last year. Costco’s fourth quarter this year was negatively impacted by a write-off of certain information technology assets of $84 million pre-tax.

The company’s fourth quarter of last year was negatively impacted by incremental expense related to COVID-19 premium wages and sanitation costs of $281 million pre-tax and a $36 million pre-tax charge related to the prepayment of $1.5 billion of debt, partially offset by an $84 million pre-tax benefit for the partial reversal of a reserve related to a product tax assessment taken in fiscal year 2019.