Costco sees improved sales performance in December

Costco Wholesale closed out calendar 2022 on an up note as December net and comparable sales growth improved from the previous month.

For the five weeks ended Jan. 1, net sales climbed 7% to $23.8 billion from $22.24 billion a year earlier, Issaquah, Washington-based Costco reported Thursday after the market close. That compared with a 5.7% year-over-year uptick in November and a 16.2% gain in December 2021.

Across the company, comparable-club sales rose 5.5% for December and were up 7.3% excluding changes in fuel prices and foreign exchange (FX) rates, versus year-ago total comp-sales growth of 14.5% (11.5% excluding fuel and FX).

By business unit, December comp sales grew 6.2% in the United States (6.4% excluding fuel and FX), 4.7% in Canada (10.9% excluding fuel and FX) and 2.5% internationally (9.1% excluding fuel and FX), according to Costco.

The comp results in December built on increases from November, when Costco tallied a 4.3% gain in overall comp sales (5.3% excluding fuel and FX) and 6% growth in the U.S. (4.6% excluding fuel and FX). U.S. comp-sales growth in December also came atop a 15.9% jump (11.5% excluding fuel and FX) in the prior-year period.

Comparable sales climbed in the low teens for the food and sundries category in December, Costco reported. / Photo: Shutterstock

December online sales improved sequentially but remained down year over year. On a comparable basis, e-commerce sales declined 6.4% for the month but were down 5.4% excluding FX. That compared with a 10.1% drop (-8.9% adjusted) in November and an increase of 17.8% (also 17.8% adjusted) in December 2021.

“Our comp traffic, or frequency, for December was up 4.6% worldwide and 3.6% in the U.S.,” Josh Dahmen, assistant vice president of finance and investor relations at Costco, said in a phone report. “Worldwide, the average transaction was up about 1%, which included the negative impact from FX and the slight benefit from gasoline inflation."

With fuel, the average worldwide selling price per gallon was up approximately 1% in December versus a year ago, Dahmen reported. Meanwhile, FX rates relative to the U.S. dollar negatively impacted net and comparable sales by 2% for the company overall, including 6.5% in Canada and 7.7% in other international markets, he said.

U.S. regions turning in the strongest comp-sales performances for December were the Northeast, Midwest and Southeast, according to Dahmen. Internationally, comp-sales results were led by Spain, the United Kingdom and Mexico.

Among merchandise categories in December, excluding FX, food and sundries posted comp-sales growth in the low teens, with the cooler, sundries and food segments as the strongest departments. Bakery and produce were the top performers in fresh foods, which generated mid-single-digit gains in comp sales.

“Year-over-year inflation in both food and sundries and fresh were down slightly from November,” Dahmen noted.

Nonfood categories generated “slightly positive” comp-sales growth for December, led by tires, sporting goods, apparel, and health and beauty, he said, while major departments underperformed, notably consumer electronics, housewares and domestics. Ancillary business comp-sales rose by mid- to high single digits, with food court, optical and pharmacy as the top performers.

Jefferies analyst Corey Tarlowe said Costco’s improved sales numbers and the moderated inflation impact led his firm to raise its comparable-sales forecast.

“Given December results, as well as the ongoing decline in gasoline prices, we are adjusting our second-quarter and full-year comp estimates,” Tarlowe wrote in a research note released late Thursday. “Our second-quarter comp estimate moves to 5.7% (versus consensus of 4.9%) and our full-year comp estimate moves to 4.5% (versus consensus of 4.6%).”

Costco's December sales report turned out "better than expected," according to CFRA Research analyst Arun Sundaram.

"We sense investor concerns about slowing same-store sales easing, as December results showed sequential improvement from the disappointing November report. That said, bigger-ticket discretionary sales (e.g. electronics) continue to be weak, which is disproportionately impacting e-commerce sales (-5.4% year over year)," Sundaram said in a research note on Friday. "We believe these results help support a membership fee increase within the next six to 12 months, along with strong renewal rates ( 92% in U.S./Canada) and signs that inflation is cooling, including gasoline prices, which are down more than 30% from the June 2022 high."

Currently, Costco operates 847 warehouse clubs overall, compared with 828 a year ago. By market, the retailer has 583 clubs in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom, 18 in Korea, 14 in Taiwan, 14 in Australia, four in Spain, two each in France and China, and one apiece in Iceland, New Zealand and Sweden. Costco also has e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

*Editor's Note: Article updated with additional analyst comment.