Costco sales soar 14.3% in December

Dive Brief:

Costco Wholesale on Wednesday reported December net sales rose to $14.94 billion in the five weeks ended Dec. 31, 2017, up 14.3% from $13.07 billion in the similar period last year. December included one additional shopping day compared to last year due to the calendar shift of New Year’s Day, which gave total and comparable sales a 2.5% boost, according to a company press release.
For the first 17 weeks of fiscal year 2018, ended Dec. 31, Costco reported net sales rose 11.9% compared to the year-ago period, to $46.06 billion. The extra day in December didn’t measurably impact that, the company said.
In December, same-store sales rose 8.8%, excluding fuel sales and currency effects (11.5% with those factors), and they rose 9.1% in the U.S. (10.5% with fuel sales and currency effects). Same-store sales rose 6.5% in the first 17 weeks of the fiscal year to Dec. 31 (9.1% with fuel and currency). E-commerce sales rose 32.2% in December (33.3% with fuel and currency) and 30.9% in the 17-week period (32.2% with fuel and currency).

Dive Insight:

Costco has cleared "the December hurdle with flying colors," according to Gordon Haskett analyst Chuck Grom.

"To put the company’s performance into some context, December represents the fifth consecutive month of double-digit total sales growth — albeit with very little unit expansion — a testament to the model, which is generating strong comps from both new and mature units," Grom said in a note emailed to Retail Dive, adding that the membership retailer’s momentum is poised to continue.

Grom cited the company’s robust e-commerce growth (calling it a "noticeable tailwind") and lower cannibalization in saying the retailer's momentum is poised to continue. The company’s shares dipped on Thursday, however, perhaps as investors took note of the effect of fuel and currency tailwinds or in anticipation that the company may not be able to hold on to its momentum.

Costco’s growth in digital sales comes after several quarters of the company treating e-commerce mostly as an afterthought. But, with a partnership with same-day delivery startup Instacart and improvements to its website, the retailer seems to have shrugged its shoulders and joined the party, without much change to its essential brick-and-mortar, membership-based nature.

"Their customers are extraordinarily loyal and trust them implicitly," retail analyst Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive in an email. "They have many internet-only exclusives, but, like in their stores, they are specific and deal oriented."

Unlike Walmart or Amazon, Costco has a quite limited SKU count — 2,500 SKUs per store more or less, Egelanian said. "So by definition they are not trying to offer the kind of unlimited marketplace the others are," he noted, adding that he believes that Costco often drop-ships their deliveries, which helps protect margins.

"In the end, I just think they are a STORE — and a really good and successful one at that — that relies on the in-store experience of the treasure hunt, and the internet just is not an integral part of that formula," Egelanian said.