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USA: Costco bucks trend with traffic and basket growth

Discount Wholesale Retail Chain Costco (listed on NYSE: COST) published its first quarter key figures. The success of Costco explains how Americans’ spending habits have changed during the coronavirus pandemic, CNBC’s Jim Cramer said Friday.

First quarter key numbers

  • Net sales increased 16.9% to US$42.4bn

  • Comparable stores sales (ex-fuel and currency impacts) increased 17.1%, with US up 17.0%, Canada up 16.8% and other international up 17.7%

  • Ecommerce comparable sales were up 86.2%

  • Net income increased 38.2% to US$1.2bn

Frequency and transaction size up

These results reveal another incredible quarterly performance for discounter Costco, with sales remaining at a significantly elevated level. As consumers continue to stock-up due to the pandemic, its bulk pack formats and larger, expansive clubs, have made it a key destination for many consumers. While most major retailers have seen traffic decline but basket size increase, Costco has seen both improve. In Q1, shopping frequency increased 5.5% globally and average transaction was up 9.4%.

Sell-through completed on some holiday items

Many of the pandemic-led product trends continue to be evident at Costco. Grocery, fresh and health and beauty sales remain strong. Spending in home categories continues to benefit as consumers spend less on travel, hotels and restaurant dining. Demand continues to grow ahead of supply for key items in categories such as fitness equipment, electronics and homewares. While the retailer has adopted a prudent approach to seasonal items for Christmas, some have already sold through, suggesting some additional sales opportunities have been lost.

Ecommerce up to 7% of sales

Ecommerce sales almost doubled in the quarter, with growth led by food and sundries, housewares, pharmacy, health and beauty, small electronics and TVs. Online grocery increased almost 300%. The channel currently represents around 7% of sales, with profitability lower than its core clubs. This is driven in part by the merchandise mix, with limited high-margin categories such as fresh foods and clothing, and high penetration of low-margin electronics. Currently, there are no plans to introduce store pickup beyond the small program it runs for high value items.

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