Membership-only retail juggernaut Costco posted strong net Q3 sales increases, overshadowed somewhat by costs associated with freight and labour.
Net sales for Q3 increased 16.3% to $51.61 billion, from $44.38 billion the year prior. Meanwhile, net sales for the first 36 weeks increased 16.4%, to $151.97 billion, from $130.61 billion last year.
Canada – where the retailer operates 104 store locations, and where it is the most-shopped Instacart retailer – showed comparable store sales growth of 15.2%.
Globally, its Q3 ecomm business was 7.4% higher than a year ago, with Canada up 12.8% for the quarter.
Costco says it hit strong membership renewal rates in North America: in the U.S. and Canada, the renewal rate was 92.3%, up 0.3% from the 12 weeks earlier at Q2’s end. The company also says it exceeded 90% renewal rates for the first time globally.
The “Executive” membership tier, which constitutes 43% of its member base and contributes a disproportionate amount of spend, tallied about 28 million, an increase of 800,000 during the 12 weeks since Q2 end.
Shopping frequency was up 6.8% worldwide, while average transactions were up 7.6% worldwide.
In its earnings call, Robert Nelson, SVP of finance and investor relations, says Costco’s top performing categories were candy, tires, toys, jewellery, home furnishings, kiosk, apparel, bakery. Underperforming categories were office, sporting goods and hardware, which were strong a year ago.
In contrast to the competition, Costco reports there has not been much of a trade down or trade out from branded products to its private label product, Kirkland Signature. But, according to Nelson, private label is up a little bit in terms of penetration, in the range of 30 to 40 basis points, and Costco is still doing a lot of business there.
“We’re not seeing trade down really. We’re seeing a little bit of shift in where people are spending their money,” Nelson noted. “Last year it was more stuff for the home, and this year, it’s more sales in tickets, restaurants, travel, tires and gas.” The company, he says, is holding its own in apparel, appliances and jewellery, showing “decent sales growth.”
SG&A came in at 8.62%, compared with 9.46% last year. Nelson says its goal is to lower prices and lower SG&A, part of a balancing act.
Nelson says it always wants to be the best value in the marketplace, despite higher freight related to gas and raw materials costs. In food and sundries, it has had to raise prices, the company admits.
Overall, Nelson says it feels “pretty good about how members are shopping.”
Costco says it expects to open two new warehouses in Canada, and 14 in the U.S.
