Costco Wholesale Corp. said e-commerce sales helped its third-quarter results. The company reported net sales of $57.39 billion, beating Wall Street analysts' expectations, and touted increases in deliveries, site visits and app downloads.
Gary Millerchip, Costco's executive vice president and chief financial officer, said gold bar and silver sales were the main drivers of e-commerce sales growth, which rose 20.7% year over year, while appliances and electronics played a key role, said Ron Bakris, who became CEO in January, and that Costco warehouses are seeing renewed interest in discretionary purchases in categories such as toys and health and beauty products.
Two of those warehouses opened in the third quarter, both in the U.S., followed by two in Loomis, California, and Nanjing, China. Miller-Chip said Costco plans to open 12 new stores in 2024, nine of which will be in the U.S., plus “two in Japan and one in South Korea.”
Costco ranks No. 6 on Digital Commerce 360's Top 1000 ranking of the largest online retailers in North America. Digital Commerce 360 classifies Costco as a mass merchandiser, a group that also includes Amazon.com Inc., Walmart Inc. and Target Corp.
Costco's third quarter e-commerce sales
“Total e-commerce sales growth during the quarter was driven by gold and silver bullion, gift cards and consumer electronics,” MillerChip said during Costco's third-quarter earnings conference call, according to a recording published by Seeking Alpha.
Among other metrics, Millerchip pointed to increased activity across Costco's website and app.
“Our app downloads grew 32% year over year with approximately 2.5 million new downloads during the quarter, bringing total downloads to more than 35 million,” he said. “Site traffic increased 16% and average order value increased 8%.”
Additionally, MillerChip said eight new vendors were added to CostConNext, the retailer's curated marketplace, in the third quarter, bringing the total number of vendors in the marketplace to 75.
Asked about buy online, pick up in store (BOPIS), which Costco is calling “buy online, pick up at warehouse,” Vakris described a focused effort to expand its offerings, with electronics being a priority.
“Right now, we are expanding our warehouse pickup of online purchases, but this will always be limited in scope based on the amount of stock in the warehouse,” Vakris explained. “We can't expand to every category, but we are currently expanding into TVs and other electronics, so we see this as a real opportunity for us.”
Delivery and Uber Eats
Meanwhile, deliveries increased during the quarter, with Millership saying they increased 28% year over year, driven by fulfillment of appliance orders through Costco Logistics.
Costco is also expanding its partnership with Uber, which Millerchip also touched on briefly.
“Previously, Uber Eats delivered Costco orders in Texas, but with this new agreement, consumers will be able to order from Costco through Uber Eats across Canada and in 17 U.S. states,” he said. “We're working to expand this partnership to several international countries in the coming months.”
Millerchip said Costco will begin selling Uber gift cards globally and will also offer Uber One membership discounts to Costco members.
Signs of increased discretionary spending
In a quarter when retailers including Target and Walgreens announced price cuts, Miller Chip noted some of the price cuts were driven by a return of discretionary spending at Costco warehouses and acknowledged an optimistic outlook for inflation.
“As inflation subsides, members are returning to more discretionary purchases,” Millerchip said. “Growth in this area was led by toys, tires, lawn and garden supplies and health and beauty.”
Elaborating on customer spending habits, Bakris credited Costco's buyers, saying that “categories like home goods and toys have been pretty depressed post-COVID,” but Costco's buyers “have reinvigorated those categories.” He cited “sports goods,” “furniture” and “household goods” as other discretionary categories seeing sales rebound.
In terms of price cuts, Millerchip pointed to specific price cuts on Costco's Kirkland Signature pine nuts and frozen shrimp, but he said Costco's larger price-cutting strategy is targeted, not widespread.
“We believe our strategy of delivering value to drive unit volume and member satisfaction is a winning combination for us,” he said. “In that sense, our purchasing team stays on top of cost changes across all SKUs and quickly captures all cost savings so we can pass on incremental value through price reductions.”
Costco's Growing Retail Media Network Team
When asked about innovation and other changes that have occurred at Costco in his first quarter as CEO, Vakris pointed to Costco's retail media network business as an area of potential.
“We have significant programs underway in retail media and see great growth potential,” he said. “We're expanding our team and see great potential and promise in areas like personalization.”
Specifically, he cited a “huge opportunity for data” as an area where other retail media networks are looking to differentiate by leveraging first-party data to target ads.
Costco's Revenues
For the third quarter ending May 12, 2024, Costco reported the following:
- Net sales increased to $57.39 per share, up 9.1% from $52.6 billion in the year-ago quarter.
- Costco's quarterly net income was $1.68 billion, up from $1.3 billion in the same period last year.
- Costco's e-commerce sales increased 20.7% year over year.
Due to rounding, percentage changes may not exactly equate to dollar figures. Check back for more earnings reports, here is the latest from last quarter.
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