ISSAQUAH, Wash. -- Costco Wholesale Corp. here said last week sales in California rose 9% for the first quarter ended Nov. 23, compared with a 5% increase in last year's fourth quarter -- a jump it said was helped by the Southern California supermarket strike.
Sales for the 12-week quarter rose 14.4% to $10.5 billion, with comparable-store sales up 11%, and net income increasing 9.9% to $160.2 million.
In a conference call with financial analysts, Richard Galanti, executive vice president and chief financial officer, said the sales jump in Southern California amounted to somewhere between $60 million and $100 million, or less than 1 cent per share.
"But we got more sign-ups from new members," Galanti said. "Because some of our units are unionized, some picketers early on in the strike were recommending that customers go to Costco, and the result was increased sign-ups," he explained.
Galanti also said sales of foods and sundries rose 10% during the quarter, largely as a result of a tobacco price increase in Canada. Sales of fresh foods, which he said account for 10% to 11% of sales, rose 18% -- with the meat and produce categories showing particular strength, he indicated -- compared with a 15% increase in last year's fourth quarter.
In response to a question, Galanti said Costco is not in a price war with Sam's Clubs, though he acknowledged that Sam's has become more price-aggressive in the last year. "We've seen increased price competitiveness, but nothing crazy," he said. "And we intend to be aggressive by remaining competitive and improving margins."
Trying to demonstrate the difference in pricing now vs. a year ago, Galanti said that, out of 100 items, Costco's prices a year ago would have been the same as Sam's on 40 to 50, lower on 45 and higher on five to 10, whereas today it is the same on 60 to 70 items, lower on 20 to 30 and higher on 10 to 15.
"But on items where Costco is higher, there are size and quality issues, and the differential is justified," Galanti pointed out.