Despite COVID-19 impeding its typically brisk expansion pace of 20 new buildings a year globally, Costco logged 13 openings in 2020 and posted its biggest year ever—$163 billion in sales, Costco Wholesale Corp. President, CEO and Director W. Craig Jelinek reported in the company’s first virtual shareholder meeting.
In addition to record sales and earnings, Costco’s 2020 highlights include 8% comp sales increases and e-commerce growth of 50%, for which delivery was key. Costco acquired Innovel, which is now Costco Logistics, to improve its last-mile delivery.
Costco ended 2020 with 795 locations globally, and just days into 2021, now has a total of 803 worldwide. In the U.S., new openings included the company’s first in Mississippi (Ridgeland), as well as locations in Idaho Falls and Meridian, Idaho; Bismarck, N.D.; Saginaw, Mich.; Saratoga Springs, Utah; Cherry Hill, N.J.; Champaign and Plainfield, Ill.; and Costco Business Centers in Sacramento and San Jose, Calif. New international locations include openings in Canada, Japan, Australia, Spain and Taiwan. Its CEO says it plans to open 22 stores in 2021.
“Today, we’re the third largest global retailer, 14th largest in the Fortune 500. We currently have a market cap, as of Jan. 8, of $164 billion,” said Jelinek, according to a Senteio transcript of the meeting. Costco currently has 117 million square feet of sell space and employs 275,000 worldwide.
Perhaps encouraged by its 50% e-commerce growth, it looks like Costco may be reconsidering its stance on online, curbside and delivery. As recently as November, Costco EVP and CFO Richard Galanti had this to say on the subject at a virtual Morgan Stanley conference: “At this juncture, we’re not looking to do some of the things that others are doing.”
However, during the shareholders meeting, Jelinek said Costco has expanded its online grocery business, offering both two-day delivery and same-day fresh delivery, through a partnership with Instacart. Jelinek later added that non-Costco member shoppers who place their Costco orders through Instacart pay at least a 10% to 12% higher premium to get goods delivered. “It makes more sense for the person buying through Instacart to do it through Costco and have a Costco membership,” he added.
And when asked in the shareholder meeting (by an unidentified participant) about when its members might be able to verify inventory levels at their local warehouses online, Jelinek, responded, “That’s probably one of the biggest questions or frequent questions that I get asked. We need to get there. I think we’re probably about a year out from being able to get that done, but that is a goal of ours to accomplish that.”
Two weeks ago, Costco dipped its toe into curbside pickup, testing two locations in Albuquerque, N.M., a move which Jelinek said was motivated by pandemic-related restrictions. “One of the reasons that we decided to try it [was] because … the local government chose to cut down capacity to something like, I believe, 75 people coming in, including employees. So we’re testing [curbside pickup] there [with] mixed results. The jury is out to see [if] we will really do anything with that business going further.”
So while Costco’s e-commerce growth was substantial in 2020, the retailer remains focused on its physical warehouses, which had seen strong foot traffic since 2017 through the start of the pandemic. “We took a hit in '20 because of COVID and the closures. We had a lot of markets that we had to monitor how many individuals came into the building that could shop,” said Jelinek. “It was a very difficult year for shopping and retail. But this year, the first quarter, our traffic is up 5.5%. So, we see brick-and-mortar being strong and stable and continuing to move forward.”
Costco By the Numbers
The Costco shareholder meeting was full of impressive digits on everything from diamonds to sports memorabilia to pricey prime beef, underscoring a record year for the membership model retailer. After all, how many retailers carry rotisserie chickens for $4.99 alongside diamond rings for $170,000?
1. Costco boasts 59 million member households, 107 million cardholders, and $3.5 billion in membership fees each year.
2. 2020 saw one of its biggest increases in beer, wine and spirits, up 17% over last year.
3. Its fresh business flourished with produce up 16%; the meat department up 21% overall, with prime beef sales of $570 million and growing, up 34% from the previous year; and the service deli selling 101 million rotisserie chickens globally last year. Costco’s ability to maintain its price point on these browned birds and keep them in stock is largely thanks to its own poultry complex, which it opened in Fremont, Neb., in 2020, said Jelinek. The 432-acre site processes over 2 million chickens per week.
4. Even with no seating allowed, Costco’s food court sold 151 million hot dog and soda combos globally in 2020. And even though consumers are driving significantly less in a pandemic, its gasoline business did $14 billion in sales.
5. The company expanded its grocery online two-day business and same-day fresh delivery, as well as its Costco Treasure Hunt available online, which includes items like Japanese Wagyu eight 6-ounce fillets for $629.99. “You wouldn’t want to have a steady diet of that, I don't think,” Jelinek admitted. Another popular big-ticket meat item this holiday season: The prosciutto leg kit (12 pounds) for $219.99.
6. Costco’s nonfood Treasure Hunt online business features an array of unique items with hefty price tags, such as a baseball autographed by Babe Ruth for $64,000; a Ty Cobb-autographed Louisville slugger bat for $160,000; and a one-of-a-kind 1.5 carat diamond solitaire ring for $170,000.
7. Costco’s cash and short-term investments total $14 billion; its property and equipment, $22 billion; its long-term/short-term debt, $7 billion; and its stockholders’ equity, $14.8 billion.