Costco Wholesale capped its fourth quarter and fiscal year with a respectable performance during a tepid-at-best economy.
The club store operator reported a 9.4% increase in net sales for the 17-week quarter ending Sept. 3, topping US$77.43 billion, and 6.7% bump in fiscal year sales compared to 2022, reaching $237.71 billion.
Canadian sales comps rose 7.4% on an adjusted basis (up 3.1% in the U.S.) and 8.1% for the year (4.2% in the U.S.).
Total revenue for the fourth quarter hit $78.9 billion, while quarterly net income came in at $2.16 billion compared to $1.878 billion during Q4 of 2022. For the year, Costco reported a net income of $6.292 billion, up from $5.915 billion last year.
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In the earnings webcast, CFO Richard Galanti said that part of the growth came from grocery staples, as shoppers pulled back on big-ticket items like furniture and electronics. “Overall, food and sundries were relatively strong once again, with fresh foods right behind,” he remarked.
Costco also saw an influx of shoppers. Traffic increased 5% in the U.S. during the most recent period and Galanti reported that membership growth was fueled by new store openings and more executive memberships.
When asked about the timing for a hike in membership fees, Galanti demurred. “My pat answer is that it’s a question of when, not if. It’s a little longer this time around, since it’s been since June of '17, but we can’t tell you if it’s in our plans – stay tuned,” he said, adding, “We feel good about our attributes of member loyalty and growth.”
To his point, more consumers are joining as Costco’s expands its footprint. The operator opened nine new net warehouses globally in the recently concluded quarter. There are 107 warehouses in Canada.
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Galanti was also queried about macro trends in the retail sector, such as inflation, labor and shrink. He said that inventory shrink has risen only slightly, “so, no, thankfully, it’s not a big issue for us.” The CFO reported that inflation during the last quarter trended down to the 1-2% range, but shared that it’s tough to predict the future pricing environment. As for labor, he emphasized that Costco’s wage package is among the highest in the industry, with an average hourly wage of $26.
On the digital front, e-commerce sales deflated a bit, down 0.6% for the quarter. “While still negative, e-comm showed good improvement this quarter,” Galanti shared. Also in that area, Costco has continued to make improvements on its mobile app and is adding suppliers to the Costco Next platform that allows members to buy direct from select brands at a Costco price.
Phillip Blee, an analyst with investment banking firm William Blair, said that Costco’s performance reflects its core strengths as a retailer. "We remain encouraged by the company’s healthy traffic gains and stability across its membership base, which should continue to insulate the model against softer demand in higher ticket, discretionary categories,” Blee said. “We believe Costco’s leading value proposition centered around low prices, high-quality products, and its private label brand, should fuel ongoing momentum in traffic as inflation-battered consumers continue to seek opportunities for savings.”
This article first appeared on Progressive Grocer