Costco's Sales Get Another Boost From Pandemic Buying -- Update

By Sarah Nassauer 

After stockpiling early in the coronavirus pandemic, Americans continue to turn to Costco Wholesale Corp. to buy bulk quantities of groceries and cleaning supplies. They have also been loading carts with home furnishing.

"As people are spending less on travel and dining out they seem to have redirected some of that spending," said Costco financial chief Richard Galanti on a conference call Thursday.

The warehouse retailer reported a 14.1% jump in comparable sales for the quarter ended Aug. 30, excluding gas and currency effects. On that basis, Costco's growth was nearly twice as high as the spring quarter when it was struggling with out-of-stock items and placed limits on shoppers.

"We expected fresh food," paper goods and other items already selling well early in the pandemic to continue selling, Mr. Galanti said, "but we were a little surprised in the strength in some of these non-food, discretionary categories," such as homegoods and furniture.

Food is selling so fast that profit got a boost from the lack of loss due to spoilage, he said.

In-stock levels have stabilized, but some items are still hard to come by in some areas, including disposable gloves and sanitizing wipes, said Mr. Galanti. Halloween-related sales are weaker, with a "small reduction in the amount of costumes," he said. Some people are booking travel through the company again, but mostly for far in the future, Mr. Galanti said.

Like those at rival Walmart Inc., Costco's stores have largely remained open throughout the pandemic, as the company was deemed an essential retailer by government municipalities. Costco has mostly returned to normal operations with shoppers and workers required to wear masks since May.

Ecommerce sales nearly doubled in the latest quarter, rising 93% from a year ago, a big jump for a company that has been slow to embrace online sales and has built its business around bulk packages. Same-day fresh food delivery has more than tripled, said Mr. Galanti. "There are some people who are not going into the supermarket."

Both Walmart and Costco have ramped up their grocery delivery options. While Walmart has built its own delivery and pickup services, Costco has mostly turned to Instacart Inc., which pays people to shop and deliver items.

Company executives believe Costco is picking up business from retailers that are closed or that don't sell items that people are buying more of amid the pandemic, such as food and homegoods, said Mr. Galanti. "We are retaining more of their dollars."

Costco, which operates 795 stores in the U.S, Canada and a few other countries, has also resumed services that were temporarily halted, such as its optical counters and food courts.

Costco is benefiting from stronger consumer spending among its generally wealthier core shoppers, analysts say. Costco shoppers pay a $60 or $120 annual membership for access to bulk products often sold at lower prices than at competitors, which tends to draw wealthier shoppers.

Costco's total revenue for the most recent quarter was $53.38 billion, 12% higher than a year ago, beating analysts' expectations of $52.11 billion.

Profit was $1.39 billion, or $3.13 a share. In the comparable quarter a year ago, Costco had a profit of $1.1 billion, or $2.47 a share. Covid-19 premium wages and sanitation expenses hit earnings by 47 cents a share, or $281 million, before tax.

--Allison Prang contributed to this article.

Write to Sarah Nassauer at [e-mail]

(END) Dow Jones Newswires

September 24, 2020 18:30 ET (22:30 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.