Costco returns e-commerce sales to growth in September

Costco Wholesale followed up a positive fiscal 2023 fourth-quarter report with strong sales gains for September, including a rebound in e-commerce.

In the five weeks ended on Oct. 1, net sales climbed 6% to $22.75 billion from $21.46 billion a year earlier, Costco reported Wednesday after the market close. The increase outpaced 5% year-over-year net sales growth in August and came atop a 10.1% surge in September 2022.

The five-week September selling period marked the start of Costco’s 2024 fiscal year. Companywide, comparable-club sales rose 4.5% year over year and were up 3.7% excluding changes in fuel prices and foreign exchange (FX) rates, according to Costco. That surpassed a 3.4% comp-sales gain ( 4.1% excluding fuel and FX) for August and built on an 8.5% upswing ( 8.6% excluding fuel and FX) in September 2022.

Across Costco’s business units, September comparable sales edged up 3.2% in the United States ( 2.2% excluding fuel and FX), 6.7% in Canada ( 8% excluding fuel and FX) and 10% internationally ( 4.9% excluding fuel and FX), Costco said. All the unadjusted growth figures exceeded comp-sales increases in August.

Costco also saw online sales get back on a growth track in September. E-commerce sales edged up 3.7% for the month ( 3.5% adjusted) following a 2.5% decrease (-2.2% adjusted) in August and a 4.1% increase ( 4% adjusted basis) in July, which had capped off eight straight months of online sales declines. For September 2022, e-commerce sales inched up 0.7% year over year ( 2.3% adjusted).

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“Our comp traffic, or frequency, for September was up 4.9% worldwide and 4.5% in the U.S.,” Josh Dahmen, assistant vice president of finance and investor relations at Costco, said in a phone report late Wednesday. “Worldwide, the average transaction was down about 0.3%, which includes positive impacts from gas inflation and FX,” he added.

In August, comparable traffic grew 5.2% worldwide and 4.8% in the U.S., while the average transaction was down 3.4%.

Relative to the U.S. dollar, changes in FX rates gave a 0.3% bump up to Costco’s overall net and comp sales for September, reflecting a 2% negative impact in Canada but a 4.9% lift internationally.

“Gas price deflation positively impacted total reported comp sales by approximately 0.5%,” Dahmen noted. “The average worldwide selling price per gallon was up approximately 3% versus last year.”

Nondiscretionary merchandise remains growth driver

By region, the leading U.S. comp-sales performers in September were the Southeast, Texas and Northeast, he reported, and the strongest international comp-sales results were seen in Spain, Mexico and the United Kingdom.

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Grocery comp-sales (excluding the impact of FX) again proved to be a growth driver among Costco’s core merchandise categories for September August, as consumers have emphasized purchases of essential goods and over discretionary items.

“Food and sundries were positive mid- to high single digits. Food, sundries and cooler were the strongest departments. Fresh foods were up mid- to high single digits. Better-performing departments included bakery and produce,” Dahmen said. “Nonfoods was
negative low to mid single digits. Better-performing departments included jewelry, tires and automotive. Weaker departments were home furnishings, sporting goods and hardware. Ancillary business sales were positive high single digits. Food court, pharmacy and optical were the top performers. Gasoline was also up mid-single digits.”

Costco continues to uphold a strong multiyear comp-sales trend, both across the company and in the U.S., according to William Blair & Co. analyst Phillip Blee.

“Adjusted comps increased by nearly 39% on a four-year stacked basis, slightly above its trailing 12-month average of 38%,” Blee wrote in a research note on Thursday. “U.S. adjusted comps increased by 2.7%, or 37%, on a four-year stacked basis, in line with its trailing 12-month average. In our view, the stability of the company’s multiyear stacked comps supports the ongoing appeal of the value proposition and the resiliency of membership base, despite a broader pull-back in discretionary demand.”

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Issaquah, Washington-based Costco currently operates 861 wholesale clubs, compared with 839 a year earlier. By market, the company has 591 clubs in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden. Costco also runs e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.