With Gold Bars And Babe Ruth Autographs, Costco Shines

Whether with one-ounce gold bars, a $20,000 Babe Ruth autograph or discounted Disney e-gift cards, Costco keeps delivering on its commitment to surprise and delight shoppers.

Even as other retailers cite consumer cutbacks in lukewarm results, the Issaquah, Washington-based company reported a 6.1% sales increase in the first quarter of the fiscal year to $56.72 billion. That’s up from $53.44 billion in the year-ago period.

On a comparable store basis, that’s a gain of 3.9%, with U.S. sales weakest, up 2.6%, and ecommerce rising 6.1%.

Net income for the quarter rose to $1.59 billion, up from $1.36 billion in the year-ago period.

Observers watch Costco's results closely, with many seeing the membership-only company as a proxy for the financial health of middle and upper-middle-class families. If that’s the case, economists can worry less: In the past quarter, shoppers loaded their carts with fresh foods, turning in a strong performance. The company sold some four million pies in the three days before Thanksgiving.



And people shopped more often, with trips increasing 4.7% overall and 3.6% in the U.S. Spending per trip declined, however, slipping about 1% overall, and 1.6% in the U.S.

Bright spots include TVs, up in the high single digits despite weakness in other electronics, and tires, up in the low teens.

It also made strategic gains in digital efforts, with online sales on the biggest cyber days -- Thanksgiving, Black Friday, Saturday, Sunday and Cyber Monday -- rising in the mid-teens compared to last year. App downloads increased by 10% and now stand at 30.5 million.

And in the “fun, wow” category Costco is known for, “we sold over $100 million of gold during the quarter,” in one-ounce bars, says Richard Galanti, chief financial officer, in a conference call webcast for investors. The 24-karat bars, priced around $2,000, are limited to two per customer and usually sell out within hours of appearing on the website. “We sold a Babe Ruth autographed index card for $20,000,” he says. And there’s “a Mickey Mantle autographed 1951 rookie card in nearly perfect condition, and it's on sale online for $250,000.”

Costco has also seen a surge in gift card sales, including a new Disney eGift card valued at $250 and being sold for $225.

Renewal rates for members stayed strong, at 93% in the U.S. and Canada and 91% internationally.

“Member engagement KPIs remain robust,” writes Peter Benedict, an analyst who follows the company for Baird and continues to expect the company to outperform competitors. “When combined with encouraging commentary around holiday sales trends, Costco’s model continues to resonate with consumers.”

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