Grocery sticker shock is still hammering American food shoppers, but Costco’s latest results show just how strong the retailer’s relationship is with its devoted members.
Sales at the Issaquah, Washington-based warehouse retailer increased 8.1% to $53.44 billion in the first quarter of its fiscal year, up from $49.42 billion last year. Comparable sales, adjusted to exclude the impact of gas prices, moved up 6.5%.
Net income increased to $1.36 billion, compared to $1.32 billion in the year-ago period.
Membership climbed 7% to 66.9 million paying household members and 120.9 million cardholders. And revenue from membership fees rose 5.7% to $1 billion.
The company, which has close to 850 warehouses worldwide, also announced plans to step up expansion, adding 24 new units this year while relocating three others.
Costco caters to more affluent shoppers than many of its rivals. But in a conference call for investors, chief financial officer Richard Galanti acknowledged weaker consumer spending, especially in bigger-ticket discretionary purchases. “It rains on all of us during these tougher times,” he said in a conference call for investors.
Ecommerce sales dipped 3.7%. Galanti said that digital sales among major categories, including appliances and consumer electronics, fell in the high single digits.
Shoppers also spent less on fresh foods.
The results came in a bit ahead of Wall Street expectations, and some observers say Costco is well prepared for whatever lies ahead.
“While not immune to slowing discretionary spend,” writes Peter Benedict, an analyst who follows the company for Baird, it helps that only about 10% of its sales come from big-ticket categories like consumer electronics, jewelry and furniture. “Costco remains well positioned to weather a more challenging consumer-spending environment.”
While Costco’s sales have held up nicely, evidence continues to emerge that U.S. consumers are more pressured by rising food costs than many retailers know. New research from Swiftly finds that two-thirds of shoppers are struggling to pay their grocery bills, and nearly 83% now rely on some form of coupon, rewards app or loyalty program when shopping.
About three-quarters say they’ve changed shopping habits due to rising prices, including a 33% increase in those who choose to shop in stores. And local stores continue to win favor, with 70% naming a local grocery store as their preferred food retailer. Swiftly, which provides tech solutions for retailers, conducted the research among 1,500 participants.