Costco Wholesale kept up its improved sales momentum in August but saw e-commerce sales fall back down.
For the four weeks ended Sunday, net sales rose 5% to $18.42 billion from $17.55 billion a year earlier, Costco reported Wednesday after the market close. The growth continued a bounce-back from July, when net sales climbed 4.5%, and built on an 11.4% jump from August 2022.
Costco also reported its near-full fiscal 2023 results. Net sales totaled $232.95 billion for the first 52 weeks of the 53-week fiscal year, up 4.6% from $222.7 billion in the prior-year period. The warehouse club chain’s 2022 fiscal year had 52 weeks.
Companywide, comparable-club sales advanced 3.4% for August and were up 4.1% excluding changes in gasoline prices and foreign exchange (FX) rates, Costco said. That topped a 2.5% comp-sales increase (+5% excluding fuel and FX) for July and came atop a 10.1% surge (+8.7% excluding fuel and FX) in August 2022.
Among Costco’s business units, August comp sales grew 2.8% in the United States (+3.2% excluding fuel and FX), 3% in Canada (+7.5% excluding fuel and FX) and 7.3% internationally (+5.4% excluding fuel and FX), according to Costco.
Online sales declined 2.5% in August and were down 2.2% on an adjusted basis. That followed a 4.1% increase (+4% on an adjusted basis) in July, which had marked the end of eight consecutive months of e-commerce sales decreases. For August 2022, online sales rose 3.9% year over year (+4.8% adjusted).
“Our comp traffic, or frequency, for August was up 5.2% worldwide and 4.8% in the U.S.,” David Sherwood, vice president of finance and investor relations at Costco, said in a phone report late Wednesday. “Worldwide, the average transaction was down about 1.7%, which includes the negative impact from gas, deflation and FX,” he added.
In July, comparable traffic grew 6.1% worldwide and 6.4% in the U.S., and the average transaction shrank 3.4%.
Relative to the U.S. dollar, FX rate changes shaved Costco’s overall net and comp sales by 0.4% for August, reflecting a 4.5% negative impact in Canada and a 2.3% boost internationally.
“Gas price deflation negatively impacted total reported comp sales by approximately 0.3%,” Sherwood said. “The average worldwide selling price per gallon was down approximately 2% versus last year.”
The top comp-sales performers by U.S. region in August were the Southeast, Texas and Midwest, Sherwood reported, while Spain, Mexico and Australia were the international leaders.
“Year over year, inflation in food and sundries continues to decrease and was lower than in July,” he said.
Food, groceries again lead the field in comp sales growth
Reflecting a trend among mass retailers, Costco grocery comp-sales (excluding the impact of FX) continued to lead in growth among core merchandise categories for August, as consumers remain focused on staple goods and have reined in discretionary expenditures.
“Food and sundries were positive in the high single digits. Sundries, candy and food were the strongest departments. Fresh foods were up mid-single digits. Better-performing departments included bakery and meat,” said Sherwood. “Nonfoods was negative low single digits. Better-performing departments included jewelry, automotive and tires. Weaker departments were sporting goods, garden and home furnishings. Ancillary business sales were positive low single digits. Food court, pharmacy and optical were the top performers. Gasoline was lower, driven by the average price per gallon.”
Currently, Issaquah, Washington-based Costco has 861 wholesale clubs, compared with 838 a year earlier. By market, the company has 591 clubs in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one apiece in Iceland, New Zealand and Sweden. Costco also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
“Given August’s sales results, Costco’s implied fourth-quarter-to-date merchandise sales landed at roughly $72 million,” William Blair analyst Phillip Blee said in a research note Thursday. “We expect fourth-quarter sales will be in line with our estimate of $77 million, assuming a $5 billion contribution from the 53rd week, which is nearly $1 billion above the Street’s expectations.”
He added that Costco’s e-commerce sales dip in August reflected the online channel’s greater exposure to marketwide lackluster sales in large-ticket hardline categories such as electronics, seasonal and home furnishings. Same-day deliveries via Instacart, mainly driven by groceries and fresh foods, aren’t included in those numbers at Costco.
“Traffic experienced positive trends both worldwide and domestically, but transactions were down again in August (albeit improved versus July),” Jefferies analyst Corey Tarlowe wrote in a research note Thursday on Costco’s August results. “While nonfoods continues to lag, ancillary sales trends inflected positively and core 3-year stack comps improved across all regions compared to July.”