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USA: Costco’s revenue soars 17.5% to $196bn in 2021

Updated: Oct 1, 2021

Discount wholesale retail chain Costco’s fourth quarter and full year results and the challenges it is seeing with higher costs, shipping capacity and labour shortages. Fourth quarter and full year key numbers

  • Q4 total revenue up 14.8% to $62.7bn, with full year revenue up 17.5% to $196.0bn

  • Comparable sales for the quarter (ex-fuel and currency impacts) up 9.4%, including up 10.3% in the US, 6.7% in Canada and 7.3% in other international markets

  • Q4 ecommerce comp sales up 8.9%, up 42.6% for the full year

  • Operating income for the quarter up 15.2%, and for the full year up 23.4% to $6.7bn, representing 3.4% of revenue

  • Net income up 16.8% for the quarter and up 25.1% for the full year

Curbside test discontinued In the fourth quarter, traffic increased 9.2% globally, with average basket up 5.8%. Ecommerce also continued to grow, building on a strong performance from last year. Sales through Costco Logistics, it’s delivery service for big and bulky items that was brought in-house last year, were up 130% and represented 24% of US ecommerce sales, up from 11% last year. However, its curbside test in New Mexico has been discontinued, with the company noting that it did not see much traction with it. This is surprising given the success that Sam's Club is having with its club pickup programme. We expect Costco to look at this again, possibly in higher density markets.

Rolling-out digital payments The retailer is also testing several other digital programmes. These include digital payments within the Costco app. This is in pilot across several locations, with full roll-out expected by the end of October. It is also introducing the capability for members to view their receipts online and has improved its mobile site with a new look and feel and enhanced information. Grown revenue by more than $43bn over last two years

Not only are these an outstanding set of results from Costco for the last 12 months but follow a strong performance in the previous year. Over the last two years, Costco has increased its revenue by more than $43bn, up 28.3%. During 2021, the strong performance was broad based across all its global markets.

Delaying price increases improving its value proposition As with the wider industry, the retailer is facing into with cost, supply chain and labour challenges. Inflationary factors are broad based, but is seeing major increases in shipping costs, pulp and paper goods, resin and plastic products and metals. Products such as plastic cups, plates and wraps are up in the 5-11% range. Oil, coffee and nuts are at five-year highs. It estimates inflation on the products it sells to be running at 3.5-4.5%, up from its third quarter estimate of 2.5-3.5%. With Costco typically among the last of its peer group to raise prices in an inflationary environment, its value proposition could resonate even more strongly given the dynamics of the market.

Supply chain issues expected to continue into 2022 Within the supply chain, it is experiencing port delays, container shortages, COVID-19 disruptions, and shortages on various components, raw materials and ingredients. This is leading the company to sell-out quickly of items. Labour cost pressures are being driven by driver shortages. Several suppliers have requested longer lead times, especially on ingredients and packaging. It expects the issues will extend into 2022.

Three ocean vessels chartered for next year Consequently, Costco has also chartered three ocean vessels for the next year to transport containers between Asia and the US and Canada. It’s leased several thousand containers for use on these ships. Every ship can carry 800 to 1,000 containers, with plans to make approximately 10 deliveries next year. This highlights the scale of current industry challenges; not every retailer will be able to do this.

First club set to open in New Zealand In the year ahead, the company plans to open around 25 new clubs, including its second units in Chain and France and its first store in New Zealand. Capital expenditure is expected to be in line with last year’s $3.6bn spend.

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