Commentary

Free Samples Returning To Costco After COVID-19 Expenses Soar

After reporting that Costco’s quarterly results were “negatively impacted” by “wage, safety and sanitation costs related to COVID-19,” CFO Richard Galanti yesterday dangled the return of a couple of crowd-pleasing favorites to analysts on its Q3 earnings call: free sample munchies and cheap fast food.

“The retailer suspended its popular samples in its wholesale clubs in early March over safety concerns with the spread of the coronavirus. Consumers mourned the smorgasbord of free snacks on social media, which was one of the first programs to be cut as the threat of COVID-19 grew,” Kelly Tyko writes  for USA Today. “But during Costco's quarterly earnings call Thursday, officials said they were targeting a mid-June return of the freebies.”

advertisement

advertisement

“We’re going to start doing some things in mid-June on a slow rollout basis in sampling…,” Galanti said. “I can’t tell you anymore, but needless to say it’s not going to be where you go and just pick up an open sample with your fingers.”

Another lure for budget-conscious fast-food enthusiasts is also coming back.

“For all those who have missed munching on Costco Wholesale Corp.’s cheap and tasty hot dogs, don’t worry: Nearly all of its food courts will be re-opened by the middle of June,” writes  Bloomberg’s Matthew Boyle. 

“About 20% of the food courts were reopened at the end of the quarter. Costco has also eliminated some food items, but didn’t say which ones,” Boyle continues.

“The company is navigating a new dynamic that includes some shoppers who don’t want to go out, and others who still prefer to visit stores but want to feel safe…, Galanti said. The company faced some angry critics after the chain required customers to always wear masks in stores, but overall shoppers like the rule, Galanti said,” Sarah Nassauer writes  for The Wall Street Journal.

“Some shoppers prefer large stores such as Costco ‘which is bigger, more wide open,’ he said, and ‘all we’re doing with the mask requirements. There are a few people that don’t like it, but most people do,’” Nassauer adds.

“Costco earlier this month reported that its April sales fell 1.8% as skyrocketing e-commerce sales didn’t make up for a drop in foot traffic at its stores, which the retailer pinned down on stay-at-home orders, social distancing restrictions and closures, adding that the ongoing coronavirus-related shutdowns also impacted its travel business, food courts and departments such as optical and photo,” Claudia Assis reports  for MarketWatch.

“April sales fell to $11.4 billion from $11.6 billion in April 2019. E-commerce sales rose nearly 86% in the month, the retailer said. Same-store sales fell 4.7% in April, including a 3.3% drop in U.S. same-store sales. Costco’s March sales, which partially captured the impact of the first days of shelter-in-place orders across the U.S. to curb the spread of coronavirus, rose 12% and included a 48% jump in online sales,” Assis adds.

“Recently our [in-store] sales have started to recover somewhat as states have begun to relax restrictions,” Galanti said on the earnings call, which was transcribed by Seeking Alpha.

“Within the merchandise categories, foods, fresh and other essentials have been very strong despite out of stocks on some items throughout the quarter such as toilet paper, paper towels, cleaning supplies, et cetera, meats and proteins toward the end of the quarter, hand sanitizers and the like,” Galanti reported.

Offices supplies also did well as people turned their nooks and living rooms into home offices while “discretionary categories” such as jewelry, luggage, third-party gift cards “were generally weak. Other weak categories which include things like sporting goods, lawn and garden, patio and apparel… have rebounded somewhat towards the end of the quarter,” he added.

“Costco’s long-term prospects continue to look very promising thanks to its unique consumer value proposition coupled with open-ended global growth prospects. That’s on top of a consistent track record of shareholder returns, a strong management team, and prospects for a special dividend, and a ‘leading competitive position poised to continue to drive share gains,’” Oppenheimer analyst Rupesh Parikh “reassured investors” after the report was posted, Ben Mahaney writes  for Yahoo Finance.  

Not to mention that the $4.99 rotisserie chickens will continue to turn on their spits, as they have throughout the crisis.

Next story loading loading..