Costco Makes $1B Splurge To Speed Deliveries

While Costco’s front end has been busy selling disinfecting wipes and mountains of toilet paper to frantic consumers, the retailer made a major acquisition, spending $1 billion in cash on a company called Innovel Solutions.

While the deal got little attention amid the COVID-19 crisis, it’s a significant move for Costco. The Issaquah, Washington-based retailer says the purchase will help it with “the last mile,” the logistically challenging ability to get purchases from its warehouses into people’s homes.

Innovel was a subsidiary of Transform Holdco, the parent company of Sears and Kmart, delivering and installing big, bulky purchases, such as appliances, furniture, mattresses, fitness equipment -- even wine cellars.

Costco, which has been one of its customers since 2015, says its coverage extends to about 90% of the U.S. and Puerto Rico, and that it owns 1,100 trucks and 11 distribution centers.



Earlier this month, Costco impressed the financial world with a second-quarter earnings report that beat forecasts, including an 11.6% jump in comparable-store sales.

Net sales for the quarter rose 11% to $38.26 billion, from $34.63 billion last year. Net income for the quarter climbed to $931 million, from $889 million.

But February sales popped 14%, and it attributed a 3% gain to virus-fueled shopping, with that momentum continuing into March, writes Rupesh Parikh, an analyst who covers the company for Oppenheimer & Co.

Meanwhile, as economic fears grow about the impact of the pandemic, Oppenheimer says it expects Costco’s prospects -- along with retailers like Dollar General and Walmart, which it recently upgraded -- to remain bright.

Oppenheimer's recent report quotes Spartan Nash, a food distributor, which says it is seeing “retail and distribution sales volume trending at two to three times normal sales levels at some locations since the onset of the coronavirus.”

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