Dive Brief:

• Costco plans to have pickup lockers in more than 200 of its U.S. retail locations by the end of 2022 — more than twice the number of stores where it currently operates the self-service offerings — Chief Financial Officer Richard Galanti said during the retailer's earnings call on Thursday for its fiscal first quarter, which ended Nov. 21.
• Digital sales, excluding the effects of changes in gas prices and foreign exchange rates for the membership warehouse chain, were up 13.3% during the quarter compared with the same period in 2020.
• Costco's latest financial results continue a string of strong year-over-year sales that have helped push its stock price up by 50% during the past 12 months.

Dive Insight:

While Costco's sales growth has tapered off in recent months, the company is continuing to log strong results as the pandemic drags on — and digital sales are playing an important role in driving that momentum.

Costco posted net sales of $49.42 billion during Q1, up 16.7% compared with the first quarter of 2020. E-commerce accounts for roughly 8% or 9% of Costco's overall sales every quarter, Galanti said during the call.

Costco's strategy of encouraging online customers to enter its stores to pick up items is paying off, with half of shoppers who visit its warehouses to collect orders from its growing number of lockers opting to make additional purchases, Galanti said during the call. Costco currently has lockers in 112 of its 572 locations in the U.S. and Puerto Rico, he said.

Earlier this year, Costco began piloting curbside pickup at three stores in New Mexico, but quickly scrapped the project after it failed to gain traction.

The retailer is also aiming to link its online business with in-store visits by adding ordering kiosks to its retail locations, Galanti said.

In addition, Costco has launched an online marketplace called Costco Next that gives shoppers access to "curated items with Costco values," Galanti said. The service currently has just shy of 1,000 items from 34 suppliers, he said.

Galanti added during the call that Costco's strategy of focusing on selling large quantities of a relatively small assortment of goods has helped its performance by giving it outsized economies of scale compared with other retailers.

"I can't think of any company that has the buying power per item that we do, because we do roughly $200 billion in sales with 4,000-ish items versus anybody else that's doing it with hundreds of thousands of items, or 50,000 items," Galanti said.

Costco's limited assortment has also helped it keep items on its shelves despite supply chain challenges, Galanti said. Referring to media reports about a shortage of cream cheese, he said Costco has been able to keep ample supplies of that food in stock.