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Costco Says Its Bargains Continue to Lure Consumers to Shop

Costco

When it comes to consumers and their buying habits, Costco said its deals are drawing bargain-hunting customers to its aisles. 

“We’re looking at the consumer through somewhat rose-colored glasses,” said Richard Galanti, CFO at Costco, during the retailer’s latest quarterly earnings call on Thursday (Dec. 14). 

Galanti also noted that while Costco is convinced that the prices it offers is what’s making the difference, he acknowledged various improvements, such as website enhancements and evolving communication strategies, which, though not entirely flawless, have played a role. 

On the whole, Galanti attributed Costco’s success to their effective introduction of new products and a proactive approach to opportunities, even in industries experiencing decline. The company aims to keep engaging customers, recognizing that a robust customer base increases the likelihood of transactions. 

Galanti highlighted positive membership trends, with renewal rates at 92.8% in the U.S. and Canada, and 90.5% worldwide. Q1 concluded with 72 million paid household members, a 7.6% YoY increase, and 129.5 million cardholders, up by 7.1%. Executive members, representing over 46% of paid members, contributed to over 73% of worldwide sales. 

In terms of expansion, Costco is opening 10 locations in the coming quarter and 33 locations in fiscal year 2024. 

The company also noted positive trends in its eCommerce sales, with Q1 income sales, excluding FX, increasing by 6.1%, marking the first positive growth in five fiscal quarters. Costco logistics achieved a record-breaking 17% YoY increase, completing over 800,000 deliveries. Mobile and digital efforts saw a 10% increase during the quarter, with app downloads reaching 30.5 million. 

The Attraction of Payment Options

In September, Citi announced that Costco Anywhere Visa cardmembers could access their buy now, pay later (BNPL) option, called Citi Flex Pay, when paying for their purchases. 

Cardholders can pay over time with a fixed fee and no interest, and can also earn cash back rewards.

Furthermore, cardmembers also have the option to incur no fees or interest by opting for a three-month Citi Flex Pay payment plan on qualifying purchases, whether made in-warehouse or on Costco.com, as per the announcement. This benefit is expected to extend to Costco Anywhere Visa Business cardmembers in the upcoming months. 

Read more: Citi Launches BNPL Option for Costco Anywhere Visa Cardholders 

Costco by the Numbers 

In the first quarter, Costco reported an increase in net sales, reaching $56.72 billion, up 6.1% from the same period in the previous fiscal year. The growth was influenced by a calendar shift due to the fifty-third week in fiscal year 2023, contributing approximately one-half to one percent to net sales in the U.S. and worldwide.  

Comparable sales, reflecting year-over-year (YoY) performance, showed a net income of $1.59 billion, or $3.58 per diluted share, an improvement from the previous year’s $1.36 billion and $3.07 per diluted share. The results included a tax benefit of $44 million related to stock-based compensation. 

Additionally, Costco declared a special cash dividend of $15 per share on its common stock, payable on Jan. 12, 2024. The total payment is approximately $6.7 billion.