Costco's Kirkland Signature Penetration Rate Grows
Private label penetration rates at Costco continue to grow as the warehouse club has cut prices on select items sold under its proprietary Kirkland Signature brand.
In a conference call to discuss fourth quarter and full-year results, Gary Millerchip, executive vice president and chief financial officer reported Costco lowered the price by 13% on its Kirkland Signature Boneless Chicken Tender line, leading to a 21% lift in pounds sold.
“Our goal is always to be the first to lower price where we see the opportunities to do so,” he said.
Examples of other price cuts on Kirkland Signature products include standard foil reduced from $31.99 to $29.99, Macadamia nuts reduced from $18.99 to $13.99, Spanish Olive Oil 3-liter reduced from $38.99 to $34.99, and Baguette 2-pack reduced from $5.99 to $4.99.
“We're also delivering greater value by adding some new Kirkland Signature items such as our Organic Golden Maple Syrup and Aerosol Whipped Cream,” Millerchip said. “Kirkland Signature offers significant member value compared to the national brands and continues to grow at a faster pace than our business as a whole.”
Additionally, Costco is working with suppliers to localize the production of bulky items such as water, paper, and laundry detergent while also looking for opportunities to streamline packaging to find additional cost savings.
“A great example of this is our Kirkland Signature laundry packs, which we recently converted from a rigid plastic tub to a pouch,” he said. “This allowed us to reduce the plastic packaging by 80% and pass these cost savings on to the member, lowering the price by $1 from $19.99 to $18.99.”
As Costco works to reduce pricing on products sold under the Kirkland Signature brand, the retailer is also seeing the penetration rate of its own brand continuing to grow, said Ron Vachris, president and CEO.
“It’s now in the high 20s (percent) and it continues to grow,” Vachris said, in reference to Costco’s private label penetration rate. “We have some great items coming up next year in Kirkland Signature that will continue to enhance that value proposition to our members and continue to build loyalty with our members because this is the place you come to get Kirkland Signature.”
The comments by Millerchip and Vachris following Costco’s release of its fiscal year fourth quarter and full-year results.
For the 16 weeks ending September 1, company-wide net sales were $78.2 billion, up 1% from sales of $77.4 billion in the 17 weeks in the prior year. Net income for the 16-week fourth quarter was $2.354 billion, or $5.29 per diluted share, compared to $2.160 billion, or $4.86 per diluted share, in the 17-week fourth quarter last year.
Total company same-store sales for the fourth quarter were up 6.9%. By geographic segment, comparable store sales in the U.S. were up 6.3%, up 7.9% in Canada, and up 6.9% in Other International. E-commerce comparable sales were up 19.5%. These comparable figures exclude the impact of gasoline and foreign exchange rates.
For the 52-week fiscal year, Costco reported net sales of $249.6 billion, an increase of 5% from $237.7 billion reported in the 53-week fiscal year 2023. Net income for the 52-week fiscal year was $7.367 billion, or $16.56 per diluted share, compared to $6.292 billion, or $14.16 per diluted share, in the 53-week prior year.
Total company same-store sales for the full year were up 5.9%. By geographic segment, comparable store sales in the U.S. were up 5%, up 8.1% in Canada, and up 8.4% in Other International. E-commerce comparable sales were up 16.2%. These comparable figures exclude the impact of gasoline and foreign exchange rates.
