Costco Wholesale Corp. credited ecommerce sales in earnings results for its fiscal third quarter. The company beat Wall Street analysts’ expectations, reporting net sales of $57.39 billion and touting increased deliveries, site visits and app downloads.
Underpinning a 20.7% rise in ecommerce sales year over year, Gary Millerchip, executive vice president and chief financial officer at Costo, listed gold bars and silver sales as significant drivers. Meanwhile, appliances and electronics played key roles as CEO Ron Vachris, who stepped into the role in January, said Costco warehouses have seen returning interest to discretionary purchases in categories such as toys and health and beauty products.
Those warehouses saw two new openings during Q3, both in the U.S., with two more than have since followed in Loomis, California, and Nanjing, China. Millerchip said Costco expects to open 12 new locations in 2024, with nine of those in the U.S., plus “two in Japan and one in Korea.”
Costco is No. 6 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Digital Commerce 360 categorizes it as a mass merchant, a group that also includes Amazon.com Inc., Walmart Inc. and Target Corp.
Costco ecommerce sales in Q3
“Total ecommerce sales growth in the quarter was led by gold and silver bullion, gift cards and appliances,” said Millerchip during Costco’s Q3 earnings call, according to a transcript published by Seeking Alpha.
In other metrics, Millerchip pointed to increased activity across Costco’s website and apps.
“Our app downloads were up 32% versus a year ago with about 2.5 million new downloads in the quarter, bringing total downloads to more than 35 million,” he noted. “Site traffic was up 16% and average order value was up 8%.”
In addition, Millerchip said the retailer’s curated marketplace, Costco Next, added eight new vendors during Q3, as the total number of vendors in the marketplace reached 75.
Asked about buy online, pick up in store (BOPIS), which Costco refers to as “buy online, pick up in warehouse,” Vachris described a focused effort for expanded offerings with electronics as a priority.
“Right now, we’re rolling out an expanded buy online pickup in warehouse that is always going to be limited in scope based on the volume in our warehouses that we have,” Vachris explained. “We can’t expand to all categories, but we’re expanding as we currently speak in televisions and other electronic items that are there as — and so yeah, we see that as a real opportunity for us.”
Deliveries and Uber Eats
Meanwhile, delivery picked up during the quarter, with Millership citing a 28% rise in volume year over year, with appliances driving order fulfillment through Costco Logistics.
Costco has also expanded its work with Uber, which Millerchip briefly addressed.
“Previously, Uber Eats delivered Costco orders in Texas and this new agreement allows consumers the ability to order from Costco through Uber Eats across all of Canada as well as 17 states in the U.S.,” he stated. “We are also working to expand this partnership to several of our international countries in the coming months.”
Millerchip said Costco will also begin selling Uber gift cards globally, while providing Uber One membership discounts to Costco members.
Signs of growth in discretionary spending
In a quarter that saw announcements of price cuts from retailers such as Target and Walgreens, Millerchip acknowledged an optimistic outlook on inflation with some price cuts happening in Costco’s warehouses as spending returned to discretionary categories.
“As inflation has leveled off, our members are returning to purchasing more discretionary items,” said Millerchip. “And growth in the category was led by toys, tires, lawn and garden and health and beauty aids.”
Vachris elaborated on customers’ spending habits, crediting Costco’s buyers and saying that although “categories such as the home division and toys are categories that have lagged quite a bit post-COVID,” Costco’s buyers have “rejuvenated those categories.” He cited “sporting goods,” “furnishings” and “domestics” as other discretionary areas seeing renewed sales.
As for price reductions Millerchip mentioned specific cuts for Costco’s Kirkland Signature pine nuts and Kirkland Signature frozen shrimp. However, he framed Costco’s larger strategies for cuts as targeted and not broad.
“We believe our strategy of delivering value to drive unit volume and member satisfaction is the winning combination for us,” he said. “In that vein, our buying teams are constantly aware of changing costs across all of their SKUs and are ensuring that we are capturing all cost decreases quickly so that we can pass on incremental value through price reductions.”
Growing Costco’s retail media network team
Asked about innovation and other changes coming out of his first full quarter as Costco’s CEO, Vachris cited Costco’s retail media network operations as an area where he sees potential.
“We have a significant program now with retail media and we see some great upside potential,” he stated. “We’ve expanded that team and we see some good potential and some good runway for us in that as well, things like personalization and so forth.”
Specifically, he cited “a great opportunity for data,” as an area where other retail media networks are seeking to differentiate themselves, leveraging first-party data to target ads.
Costco earnings
For the fiscal third quarter ended May 12, 2024, Costco reported:
- Net sales increased to $57.39. That was up 9.1% from $52.60 billion in the third fiscal quarter a year prior.
- Costco’s net income in the quarter was $1.68 billion. That was up from $1.30 billion the previous year.
- Costco ecommerce sales increased 20.7% year over year.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.
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