Fueled by negative results in the United States, comparable-club sales at Costco Wholesale dipped for May after a prior-month rebound, while net sales grew at a slower rate.
In the four weeks ended May 28, net sales edged up 1.2% to $18.45 billion from $18.23 billion a year earlier, Costco reported Thursday after the market close. The increase was down from annual growth for April, when the warehouse club chain posted a 3% net sales gain, and came atop a 16.9% increase in May 2022.
Net sales for the 39-week fiscal year-to-date period totaled $174.07 billion, up 5.1% from $165.56 billion a year ago, when Costco reported 16.5% growth.
The retailer’s flattish monthly sales performance, in part, reflects difficult comparisons to strong year-ago gains. In a conference call last week on fiscal 2023 third-quarter results, Costco Chief Financial Officer Richard Galanti noted that customers have been tamping down on big-ticket purchases in favor of lower-dollar-ring items like food, sundries and household essentials.
Across the company, comparable-club sales declined 0.3% in May but were up 3.3% excluding changes in fuel prices and foreign exchange (FX) rates. That compared with comp-sales growth of 1.4% (4.3% excluding fuel and FX) in April and 15.5% (11.8% excluding fuel and FX) in May 2022.
By business unit, May comp sales fell by 1.5% in the United States (+1.7% excluding fuel and FX) but rose by 0.5% in Canada (+7.9% excluding fuel and FX) and by 5.5% internationally (+6.4% excluding fuel and FX), Costco reported.
E-commerce sales decreased for the seventh straight month in May, falling 7.6% overall and down 7% on an adjusted basis.
Through the year to date, monthly online sales declined by 5.9% in April (-4.9% adjusted), 12.7% in March (-11.6% adjusted), 11.2% in February (-10.3% adjusted) and 15.4% in January (-14.4 % adjusted). May 2022 e-commerce sales climbed 6.3% annually and were up 7.7% adjusted.
Costco saw club traffic rise in May but a smaller customer basket, according to Josh Dahmen, assistant vice president of finance and investor relations at Costco.
“Our comp traffic, or frequency, for May was up 5.1% worldwide and 4.3% in the U.S.,” Dahmen said in a phone report. He added, “The average transaction was down about 5.1%, which included the negative impacts from FX and gas deflation.” For April, comparable traffic had risen 5.2% worldwide and 4% in the U.S., while the average transaction shrunk 3.6%.
Deflation in fuel pricing pared total comp sales by approximately 3%, as the average worldwide selling price fell about 19% year over year, reported Dahmen.
“Foreign currencies year over year relative to the U.S. dollar impacted total and comparable sales as follows: Canada negatively by approximately 5%, other international positively by approximately 0.1% and total company negatively by approximately 0.7%,” he said.
U.S. regions generating the top comp-sales results for May were the Northwest, Northeast and Midwest, and the strongest international performances were in the United Kingdom, Mexico and Spain.
“Year-over-year inflation for both food and sundries and fresh foods were lower than in April,” Dahmen said.
Among Costco’s merchandise categories, groceries led in terms of comp-sales growth (excluding the impact of FX) versus nonfoods, especially bigger-ticket items.
“Food and sundries were positive in the high single digits. Sundries, candy and cooler were the strongest departments,” Dahmen said. “Fresh foods were up mid-single digits; better-performing departments included bakery and meat. Nonfoods was negative low single digits. Better-performing departments included tires, health and beauty, and apparel. Underperforming departments were home furnishings, office hardware and majors. Ancillary business sales were down low double digits. Food court, pharmacy and optical were the top performers.”
Jefferies analyst Corey Tarlowe noted Costco’s nonfoods sales softness in May, along with relaxed inflation.
“May core comps were +3.3%, and year-over-year inflation moderated versus April in food and sundries and fresh. But e-commerce weakness continues,” Tarlowe wrote in a research note on Friday. “While traffic experienced positive trends both worldwide and domestically, transactions were down in May. Additionally, core three-year stack comps decreased across all regions, and Costco witnessed a greater negative impact from gas deflation.”
Issaquah, Washington-based Costco now operates 853 warehouse clubs, compared with 830 a year earlier. By market, the retailer has 587 clubs in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, 32 in Japan, 29 in the United Kingdom, 18 in Korea, 14 in Taiwan, 14 in Australia, four in Spain, three in China, two in France, and one apiece in Iceland, New Zealand and Sweden. Costco also has e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.