Costco Wholesale Corporation’s COST growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its upbeat performance. Thanks to its status of essential retailer, this Issaquah, WA-based company has been benefiting from the coronavirus-induced spike in demand. Cumulatively, these factors have been aiding this operator of membership warehouses in registering impressive sales numbers.
We also note that shares of this Zacks Rank #3 (Hold) company have advanced approximately 23.5% so far this year compared with the industry’s rally of 13%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sales Continue to Surge
Notably, Costco registered an increase of 16.9% in net sales to $16.84 billion during the five-week period ended Oct 5. This followed an improvement of 15%, 14.1% and 11.1% in the months of August, July and June, respectively. Management highlighted that sales during the month under review were favorably impacted by two holiday shifts, Labor Day in the United States and Chuseok/Moon Festival in Asia.
The company’s strategy to sell products at discounted prices has helped it expand its customer base. Under the current circumstances, people are exhibiting a preference for discount stores for essentials or other daily purchases. Apparently, Costco has emerged as viable option for them. The company’s differentiated product range resonates well with customers’ spending habits.
Sturdy Comps Run
Impressively, Costco’s comparable sales for the month of September rose 15.5%. This followed an increase of 13.2% in both August and July, and 11.5% in June. The monthly comparable sales reflect an increase of 14.5%, 17.5% and 18.5% in the United States, Canada and Other International locations, respectively.
Excluding the impacts from change in gasoline prices and foreign exchange, comparable sales for the month under discussion rose 16.9% on an improvement of 16.7%, 18% and 17.5% in the United States, Canada and Other International locations, respectively.
Uptick in E-commerce Sales
Undoubtedly, Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or at stores. Consumers’ increased shift to online purchasing owing to the coronavirus outbreak seems to have worked in favor of the company.
The company’s e-commerce sales have been showcasing a sharp increase owing to the rising stay-at-home trend to maintain social distance amid the pandemic. We note that e-commerce comparable sales soared 90.3% during the month of September. This followed an increase of 101.9%, 75.3% and 85.8% in the months of August, July and June, respectively. Costco operates e-commerce sites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia.
To drive online sales, the company launched CostcoGrocery to deliver non-perishable items to buyers’ homes. Its partnership with Instacart facilitates same-day delivery of groceries to shoppers. The company acquired Innovel Solutions, a leading provider of third-party end-to-end logistics solutions. The buyout bolsters Costco’s e-commerce capabilities and facilitates sales of “big and bulky” items.
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. It is also focused on ramping up investments in the wake of rising competition from the likes of Dollar Tree DLTR, Dollar General DG and Target TGT. We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.
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