Shoppers keep flocking to Costco
Already one of the best performing companies in retail, Costco is giving its employees a raise as it looks to keep its earnings and sales growth streaks going.
The company said in an earnings call that it plans to use some of its savings from recent corporate tax cuts to provide raises to its U.S. employees. Starting June 11, starting wages at Costco will increase a dollar an hour to $14 or $14.50.
"Costco continues as the retail poster child for consistency, with virtually every metric reflecting strength," stated Moody's Lead Retail Analyst Charlie O'Shea. "From growth in membership fees, improved liquidity, increasing online penetration, and high-single digit comp store sales growth, Costco continues to set a high bar in global retail."
Same store sales at Costco increased 7% during the third quarter, excluding fuel and currency fluctuations.
Net sales for the third quarter ended May 13 increased 12.1 percent at Costco, to $31.62 billion, from $28.22 billion last year. It was the company’s fourth consecutive quarter of double-digit net sales growth. Net sales for the first thirty-six weeks of fiscal 2018 increased 12 percent, to $95.02 billion, from $84.82 billion last year.
Net income rose to $750 million, or $1.70 per share, in the quarter, from $700 million, or $1.59 per share, a year earlier. Excluding items, the company earned $1.70 per share. Total revenue rose 12.1 percent to $32.36 billion.
Costco said during the call that price cuts and higher freight costs weighed on its gross margins. Gross margins slipped 46 basis points to 11.05 percent as the company also stepped up efforts to provide same-day and two-day delivery through delivery service provider Instacart and invested in packaging equipment.
Still, the company said an increase in membership fees implemented earlier this year and customer gains from the closure of more than 50 Sam’s club stores could help offset pressure from rising freight and labor costs.
Costco currently operates 750 warehouses, including 520 in the United States and Puerto Rico, 98 in Canada, 38 in Mexico, 28 in the United Kingdom, 26 in Japan, 14 in Korea, 13 in Taiwan, nine in Australia, two in Spain, one in Iceland, and one in France. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea, and Taiwan.