Third Quarter Sales at Costco Inch Up

The nation's largest warehouse club reports modest growth as consumers continue shifting buying habits to private brand products.
Greg Sleter
Associate Publisher/Executive Editor
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Costco reported modest sales gains in its fiscal year third quarter as the retailer’s average daily transaction was down 3.5% stemming largely from weakness in bigger-ticket nonfood discretionary items. 

Additionally, company officials noted a continued shift in consumer buying habits as shoppers are choosing private brand products in an effort to save money.

For the quarter ended May 7, net sales increased 1.9% to $52.6 billion. Through the first three quarters of the company’s fiscal year, net sales increased 5.5% to $160.28 billion. Net income for the quarter was $1.30 billion, or $2.93 per diluted share, compared to last year’s third quarter net income was $1.35 billion, or $3.04 per diluted share.

Company-wide comparable store sales were up 0.3%, with U.S. comp sales down 0.1% and e-commerce comp sales off 10%.

During an investor conference call to discuss results, Richard Galanti, Coscto’s executive vice president and chief financial officer, said that while the retailer is getting shoppers in the door, they are shifting their buying patterns. He noted that shoppers are buying non-discretionary items, fresh foods, sundries, and patio furniture, but dialing back on purchasing products such as indoor furniture. 

“While all the numbers, industrywide, are down, ours are down a little less, but they're down,” he said. “So overall, when we look at what else can we do to drive more nonfood business, at the same time, can we bring in a few more items on the food and sundry side because we know traffic is good there?”

With higher prices remaining a concern for consumers, Galanti said Costco continues to see shoppers shifting to lower-priced Kirkland-branded products. As an example, he pointed to consumers with greater frequency choosing the retailer’s private brand assortment of canned goods, such as chicken and tuna, over their name brand equivalents. 

“In the (second) quarter, we had a (1.5%) increase in private label sales penetration year-over-year,” he said. “In this quarter, the increase is (1.2%). The growth we’ve seen (in private brand sales) that we have seen suggests that we've seen people looking for better bargains.”