Fresh Food, Private Label Help Drive Costco Q2 Results
Costco reported strong growth in the second quarter as gains across various categories including fresh food, housewares, and appliances were key in driving revenue for the 12 weeks ended February 16.
Company-wide sales for the quarter increased 9.1%, to $62.53 billion, up from $57.33 billion last year. Net income for the quarter was $1.8 billion, or $4.02 per diluted share, compared to $1.7 billion, or $3.92 per diluted share, in the comparable quarter the previous year. Quarterly comparable store sales excluding gas and foreign exchange across the company were up 9.1%. U.S. comparable store sales grew 8.6%
Net sales for the first 24 weeks increased 8.3%, to $123.52 billion. Net income for the first 24 weeks was $3.59 billion, or $8.06 per diluted share, compared to $3.33 billion, or $7.49 per diluted share, for the comparable period the previous year. Total company comparable sales for the first 24 weeks excluding gas and foreign exchange were up 8.1%, with comp sales in the U.S. up 7.9%.
“Our buyers continue to bring in new and exciting items at great value,” Gary Millerchip, executive vice president and chief financial officer at Costco, said during the retailer’s investor conference call to discuss quarterly results. “For the quarter overall, gold and jewelry, gift cards, toys, housewares, appliances, sporting goods, home furnishings, and small electrics were all up double digits. Fresh in Q2 was up high single digits.”
The gains in fresh were led by double-digit growth in meat, where Costco continues to see a shift toward lower-cost proteins such as ground beef and poultry. Bakery and produce also performed well in the quarter, with food and sundries returning low- to mid-single-digit comparable sales.
Millerchip said Costco continues working to lower prices on items carried under its Kirkland Signature own brand. He pointed to the $2 price drop in the Kirkland Signature 3-Liter Refined Olive Oil (now $27.99), Kirkland Signature Organic Peanut Butter (now $9.99), and Kirkland Signature Tortilla Strips (now $4.99).
“Kirkland Signature continues to grow at a faster pace than our business as a whole and our merchants also continue to drive innovation,” he said. “Most notably this quarter, we worked with a new supplier to rework our Kirkland Signature Diapers. Improvements versus the prior offering include a longer and thicker absorbent layer, a softer outer cover, and two times more stretch in the waistband, as well as improving the quality of this item.”
Other new Kirkland Signature offerings debuted this quarter include Kirkland Signature French Fries, Kirkland Signature Vodka and Soda, and Kirkland Signature Lager.
As sales at existing stores continue to grow, Costco is also expanding its footprint. The retailer during the first week of March is opening new locations in Brentwood and Highlands, Calif., with four additional stores opening the second week of March. This includes the March 12 opening of Costco’s new Sharon, Mass., store, which will be the company’s 620th U.S. warehouse and 900th store worldwide. The company is projecting 28 new openings during fiscal year 2025, three of which will be relocations.
