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Costco Traffic, Sales and Earnings Soar in Q1

Ecommerce 'soft launch' promising, officials say

Although perceived by some as vulnerable to the expanding reach of Amazon, Costco Wholesale continued to see more customers shopping in its stores during its fiscal first quarter, while a “soft launch” of online grocery delivery during the quarter showed promise as an Amazon offensive.

The Isaaquah, Wash.-based membership warehouse club retailer reported a 13.3% sales increase in the quarter, which ended Nov. 26, while non-fuel comparable store sales grew by 8.7% on a 6.6% increase in traffic. Profits of $640 million increased by 17% on total sales of $31.1 billion. Sales were boosted by about 1.5% as a result of a calendar shift providing an extra day of pre-holiday sales counted in the first quarter, as opposed to the second quarter last year.

Speaking on a conference call with analysts, Costco CFO Richard Galanti said the chain’s new online options – including a two-day delivery feature on dry groceries and same-day offering of fresh groceries in partnership with Instacart, both launched in early October, as well as a new feature allowing shoppers to buy certain items online like jewelry and laptop computers for warehouse pickup -- were “percentage-wise, going crazy," despite being only a tiny amount of the chain's total sales. Costco’s focus in the quarter remained on attracting greater foot traffic to stores, and does not plan to put a big push on online grocery until the company can “make sure we don’t screw it up,” he said.

“We have chosen for the first two or three months [of online grocery] to basically have a soft opening, if you will, to make sure that we don't screw it up. And when I say we don't screw it up, it's growing very nicely,” Galanti said. “But clearly, when we market it, we think it will take off even more. But so far, so good.”

Galanti said Costco’s worldwide e-commerce sales for quarter were $1.3 billion, up 40% from last year’s first quarter.

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