Home Costco Copes with Supply Chain, Turns in Strong Q1
December 10, 2021

Costco Copes with Supply Chain, Turns in Strong Q1

Posted In: Retail Articles

By: Mike Duff

Contributing Editor

In its first fiscal quarter, Costco Wholesale Corp. was able to deal with supply chain issues successfully while also expanding e-commerce associated services and beating Wall Street estimates, the company stated.

The company posted a net income of $1.32 billion, or $2.98 per diluted share, versus $1.17 billion, or $2.62 per diluted share, in the year-before quarter. 

Costco topped a MarketBeat-published analyst consensus estimate for earnings per diluted share at $2.59 and revenues at $49.75.

Comparable sales were up 9.8% in the quarter when the effects of fuel and foreign exchange rate volatility are excluded, with the United States up 9.9%, Canada up 8.3% and Other International up 10.9%. E-commerce was up 13.3%.

Store traffic was up 6.8% worldwide and 5.9%  in the U.S. while average ticket, sans fuel and foreign exchange effects, was up 2.5% worldwide and 3.5% in the U.S., Costco CFO Richard Galanti said in a conference call

Net revenue was $50.36 billion in the quarter while net sales were $49.42 billion versus $43.21 billion and $42.35 billion, respectively, in the year-earlier quarter. Operating income was $1.69 billion versus $1.43 billion in the year-prior period.

Costco continues to evolve in terms of how the adapts the core operation to give members new options when they visit its clubs whether for purposes of shopping or order fulfillment. In the conference call, Galanti said Costco is rolling out new e-commerce kiosks in its clubs, with video signage and easy touch screen ordering, as well as e-commerce pickup lockers. The kiosks are available at 112 Costco locations, and the company plans to more than double that number during calendar year 2022. The company also has been expanding an online feature dubbed Costco Next, Galanti said in the call, something Iike the company’s warehouse roadshows but online. As of now, 34 suppliers are participating in the initiative and that number is growing, Galanti said, with just under 1,000 curated items with Costco value.

In terms of supply chain, Galanti said Costco had risen to the occasion in a difficult time.

“Overall, we feel we’ve dealt pretty well with the supply chain challenges in terms of delayed container arrivals on the Pacific Coast,” Galanti said.” About 79% of our import containers are late by an average of 51 days, a few percentages of those are actually a few days early, and many of them are a few days more than 51 late. Virtually all departments are impacted. We’ve ordered early in many cases, as I mentioned on earlier calls, given the longer lead times.”

He added, “Despite all the supply chain issues, we feel pretty good about staying in stock and continuing to work to mitigate the cost and price increases as best we can.”

In terms of sales trends, he noted that, in the holiday season, gift cards have been strong as have baking-related items and appliances.

Costco operates 828 warehouses, including 572 in the United States and Puerto Rico, 105 in Canada, 40 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two each in France and China, and one in Iceland. Costco also operates e-commerce websites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia. The second Costco in France and China both opened early in December. The company total also includes a recently opened U.S. club and one in Spain.

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