Facing slowing growth in its online business in a competitive marketplace, Costco narrowly surpassed analyst’s expectations on Thursday (Oct. 4). Net sales reached $44.41 billion, while analysts had expected revenues of $44.27 billion, Reuters reported.
Costco’s net income reached $1.04 billion, or $2.36 per share for the fourth quarter. Adjusted same-store sales surpassed estimates of a 6.4 increase, rising by 7.2 percent. Investments and higher gas prices, however, drove the retailer’s gross margin down by 35 basis points to just under 11 percent.
To that end, the retailer dedicated heavy spending to delivery operations and its online business. Chief Financial Officer Richard Galanti said, “We’re not only investing in price, we’re investing in infrastructure.” He also noted that the retailer plans to double down on fulfillment and IT centers.
In June, Costco’s total eCommerce sales were up 37 percent year-over-year, and its eCommerce sales were up 43.1 percent during April. The retailer’s two-day grocery delivery and same-day fresh delivery through Instacart “continue to grow nicely,” Galanti said in the retailer’s post-earnings conference call.
While that business only represents a small percentage of the total company, Galanti said that the company is seeing positive results in existing markets and some markets located further from the retailer’s brick-and-mortar locations. “We are picking up some members that we never had before because [they] were 1,500 miles away from the nearest physical Costco,” he said later in the call.
Costco rolled out same-day delivery service in October of last year. Their delivery options are free for online orders exceeding $75 from 376 U.S. Costco stores, and orders are guaranteed within two business days. Orders totaling less than $35 are subject to prices approximately 15 to 17 percent higher than those found in-store, according to the Los Angeles Times.