Costco comps aided by Covid-19 panic

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Costco comps aided by Covid-19 panic

By Mike Troy - 03/09/2020

February same store sales at Costco’s U.S. locations increased 11.6% excluding fuel, and for the company’s second quarter period ended Feb. 16, U.S. comps excluding gas increased 8.1%.

CFO Richard Galanti said about 3% of the February increase was attributable to a surge in purchase activity related to the Corona virus and it has been challenged by supply chain issues. Costco has struggled to keep some products in stock in certain markets such as shelf-stable dry grocery items, cleaning supplies, Clorox and other bleaches, water, paper goods, hand sanitizers, sanitizing wipes, disinfectants, health and beauty aids, water filtration and food storage items.

“We’re getting deliveries daily, but still not enough, given the increased levels of demand on certain key items. It’s been a little crazy this past week in terms of outside shopping frequency and sales levels, and not only in the United States,” Galanti said during the company’s second quarter earnings call.

Costco’s second quarter encompasses the holiday season, and although shortened, the company experienced strong sales.

"I think we've done a great job over the holiday season. We've been helped by strong big-ticket categories like electronics, like patio furniture and lawn and garden, and other hardlines and softlines areas,” Galanti said. “Fresh continues to drive our business. As you know, when we're asked what are the two or three big factors that drive our business or categories, it's fresh, it's gas, it's executive membership.”

During the quarter, Costco said its sales increased 10.5% to $38.3 billion, from $34.6 billion last year and e-commerce sales increased 28%. Net income for the quarter was $931 million, or $2.10 per diluted share, compared with $889 million, or $2.01 per diluted share, last year.

Looking ahead, Galanti noted, as have other retailers, that corona virus-related supply chain issues are a concern and future impacts are difficult to quantify.

"In terms of supply chain, we're finding other ways to handle any potential out of stocks by shifting SKUs to alternative items and categories, particularly in the areas of domestic goods, food and sundries, and fresh," Galanti said.

The company also said that its travel business has been impacted due to reduced demand, as well as higher-than-normal cancellations of previously booked trips, particularly as it relates to cruises and international travel.

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