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Costco sales rise as pandemic boom continues

The warehouse club operator posts strong third-quarter results and announces plans to bring back in-store sampling
5/28/2021
The outside of a Costco warehouse at sunset with a near empty parking lot

Other food retailers may be lapping the impacts of pandemic sales gains from last year into negative comps, but Costco is seeing no such slowdown.

The retailer reported third-quarter earnings on May 27 that continue to not just impress but astonish. Even as the grocery boom levels off at most other food retailers, Costco's momentum is going up.

For the third quarter ended May 9, Costco said net sales increased 21.7% to US$44.38 billion, from $36.45 billion last year. Same-store sales, excluding the impacts of fuel and currency fluctuations, shot up 15.2% in the U.S., more than the retailer's comp of 12.6% in the previous quarter.

In Canada, Costco’s same-store sales increased 32.3%, while comparable sales–excluding the impact of gasoline sales and foreign currency fluctuations--increased 16.7%.

E-commerce was also up, 38.2%, although digital sales were down from the 80.3% increase in Q2.

Net income for the third quarter was $1,220 million, or $2.75 per diluted share, which included $57 million pretax, or 9 cents per diluted share, in COVID-19 related costs, primarily from $2 per hour premium pay. Last year’s third quarter net income was $838 million, or $1.89 per diluted share, inclusive of $283 million pretax, or 47 cents per diluted share of COVID related costs. 

Membership fees increased 11% year over year to $901 million.

In an earnings call Thursday, CFO Richard Galanti said the retailer would be bringing back full sampling and demos to stores, which it suspended last March at the onset of the pandemic. 

"I'm happy to report that over the next couple of weeks, we're beginning a phased return to full sampling," Galanti said. "This will come in waves. The first wave of locations, about 170 of our 550-ish locations in the U.S. will be activated by the first week of June, with most of the remaining locations returning towards the near -- or towards the end of June. The first wave will actually determine how fast we roll out and what and when restrictions are lifted."

Galanti said increased safety protocols would be in place, including all samples prepared behind plexiglass, prepared in smaller batches for better safety control, and distributed to members one at a time.

Costco's food courts are also coming back over the next few weeks in a bigger way. In March 2020, the retailer pared back the menu basically to hot dogs, pizza, soda and smoothies, and all seating was eliminated. 

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