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12/04/2020

Costco shares sales gains, animal welfare policy change

Costco Wholesale Corp. reported another month of impressive same-store sales during the same week that the retailer won praise for landmark new global supply chain policy on animal welfare.

Costco said same-store sales in its physical stores increased in November by 14.2% (excluding fuel and currency impacts). In a pre-recorded November sales update, Senior Vice President, Financial Planning & Investor Relations, David Sherwood said the club retailer had "positive 8.4% customer traffic" in the U.S. in November. The average transaction size was up 7.2%. 

At the same time, e-commerce sales increased in November by 70.9%. The e-commerce figure was a deceleration from October's 91% increase.

Costco reported net sales of $15.67 billion for the retail month of November, the four weeks ended Nov. 29, an increase of 15.1% from $13.62 billion last year. The metric was also a deceleration from the retailer's 16% year-on-year sales rise in October, and 17% increase in September.

Sherwood said the strongest departments in November were food and sundries, which had comps in the positive low 20s, with frozen food and cooler being the strongest sub-categories. Fresh food comps were up in the positive mid 20s (meat and produce). Hard line comps were in the positive mid teens (sporting goods, office supplies, hardware). Soft lines were positive mid-teens (home furnishings, jewelry and appliances). Ancillary sales were down in the mid-teens due to lower sales in fuel and the food court. 

The strongest regions for Costco in November were the Southeast, Texas and Northeast.

For the 12-week first quarter ended Nov. 22, the company reported net sales of $42.35 billion, an increase of 16.9% from $36.24 billion last year. For the 13 weeks ended Nov. 29, the company reported net sales of $46.33 billion, an increase of 16% from $39.95 billion during the similar period last year.

Earlier this week Costco unveiled a landmark new animal welfare policy that will ban cages for animals in its global egg supply chain. The move covers Costco’s growing international footprint, which includes mainland China, Taiwan, Japan, South Korea, Mexico, Australia, Canada and Europe. 

“We are in the process of making that transition [to cage-free eggs],” noted Josh Dahmen, Financial Planning and Investor Relations Director for Costco, in an email to investors this week. “We will continue to increase the percentage over time, with a goal of eventually getting to 100%, although this may take several years in some countries, due to issues with availability.” Costco is the first U.S. retailer to issue a global policy on the confinement of animals in its supply chain.

The move was applauded by animal welfare group the Lever Foundation. 

“We applaud Costco for this landmark decision to use only cage-free eggs throughout its global supply chain,” said Kirsty Tuxford, Program Manager with Lever Foundation, a Pennsylvania-based animal protection non-profit that worked with Costco for the past two years on making the commitment. “Costco’s move will spare millions of animals from being confined for their entire lives in cages so small they can barely turn around. We commend Costco for being the first U.S. retailer to address this key animal welfare and food safety issue throughout its global supply chain.”

Costco currently operates 803 warehouses, including 558 in the United States and Puerto Rico, 102 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 14 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.