Costco's Canada sales up in Q4, CFO sees 'light at the end of the tunnel' of inflation

Costco Wholesale Corp.’s net sales for the fourth quarter increased 15.2% to $70.76 billion – up from $61.44 billion last year – as Canadian sales rose 13.4%.

On a quarterly call with investors, chief financial officer Richard Galanti said the club has had minor reprieve from inflationary cost pressures.

“Pressures from higher commodity prices, higher wages and higher transportation costs and supply chain disruptions – they're still present, but we are seeing just a little light at the end of the tunnel,” he told analysts. 

“For the fourth quarter… the estimated price inflation overall was about 8%, a little higher on the food and sundries side, a little lower on fresh foods and both higher and lower on the nonfood side. We're seeing some commodities prices coming down, such as gas, steel, beef, relative to a year ago, even some small cost changes in plastics. We're seeing some relief on container pricing. Wages are still the higher thing when we talk to our suppliers.”

The company reported a net income of $1.868 billion for Q4, compared to $1.670 billion in the prior year.

Net sales for the fiscal year were up 16% to $222.73 billion, while net income topped $5.84 billion.

Canadian sales were up 15.2% for the fiscal year ended Aug. 28. 

Galanti said Costco’s stronger departments year-over-year were tires, lawn, patio and garden, prescription pharmacy and health and beauty aids. 

The company’s CostcoGrocery delivery service for non-perishable food and household supplies and third-party delivery service with Instacart were up 20% in Q4.

As grocers report consumers are trading down amid rising food prices, Galanti said the club’s members’ shopping habits have mostly remained unchanged. 

“They're trading up or certainly trading the same,” he said. “Kirkland Signature merchandise is up just under 1% in terms of penetration compared to a year ago…So no big dramatic change from the past there.”

Costco currently operates 838 warehouses, including 107 in Canada. It also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, KoreIa, Taiwan, Japan and Australia.

The club opened nine net new warehouses in Q4, two being in Canada. In fiscal ‘23, it expects to open 29 additional warehouses, including 15 in the U.S. and 10 internationally.