Costco’s Digital Sales Surge 21% as Members Maintain Spending

Costco’s digital transformation continues, as the fiscal first quarter delivered double-digit growth in digital comparable sales and engagement with the app, and warehouse members are showing what management termed “consistency” in their spending even amid economic uncertainty.

The company logged net sales growth of 7.2% to just under $66 billion, and comparable sales gained 6.4%. CFO Gary Millerchip said during the earnings call Thursday (Dec. 11) said that digitally enabled comp sales grew 21%. As for the consumer stickiness, comparable sales in the United States grew by 5.9%, ticket sizes gathered 3.2% and traffic increased by 2.6%.

Membership and Cardholder Growth

The company had 81.4 million paid memberships, according to supplemental materials, up 5.2% and cardholders were nearly 146 million, up 5.1%.

Management commentary indicated that the company would see 30-plus net new store openings annually. Shares were down 0.7% in after-hours trading on Thursday.

As for the digital initiatives, CEO Ron Vachris said that technology within “the warehouse, the implementation of scanning memberships at entry, the Costco digital wallet, and pre-scanning small to medium-sized baskets is leading to better member experience and improved productivity. The warehouses that have first adopted this pre-scan technology have shown checkout speed improvements of up to 20%.”

The digital sales growth (where app traffic was up more than 40%) came amid demand for pharmacy and jewelry categories, along with apparel, according to company materials, and eCommerce site traffic was up 24%, with 13% growth in average eCommerce order values.

In signals of consumers’ value seeking behaviors, fresh grocery sales were up mid- to high single-digit percentages, led by double-digit growth in meat. Kirkland Signature private label offerings are growing faster than the overall sales pace, management said.

AI Improves Pharmacy Operations

Vachris said during the call said that AI is being leveraged within the pharmacy inventory system. “This system now compares prescription drug pricing across vendors and autonomously and predictively reorders inventory, improving our in-stocks to more than 98%. This change has played an important role in helping us achieve mid-teen growth in pharmacy scripts filled and has improved margins while lowering prices to our members,” Vachris said.

Asked on the call about technology initiatives moving forward, Vachris said that “We’ve had to spend. A couple of years ago, we really focused on our fundamental base systems and our core systems behind the scenes that will allow us to build for the future.  And so we’re now coming to a fruition where we’re starting to see the benefits of that hard work of all the backroom systems that we had to build that are now coming to light and coming to the front face for our members. We feel that technology is going to be part of the big part of our future.”

Membership spending is proving resilient, management said, and Vachris said that beyond month to month lumpiness that might be tied to tariff uncertainty, “when we look at what we’re seeing with the overall sort of patterns of how members are shopping and how they’re behaving, we’ve seen a … consistent pattern and a consistency in the results.”

CFO Millerchip also noted that there’s continued upside with retail media, where “the data and tech platform that allows us to execute personalization at scale” that delivers value for partners. “We’re seeing some early success, but it’s still very much an opportunity in the future on the roadmap for us,” he said.

Said Millerchip, in a nod to digital engagement, “Our expectation would be that digital sales, as we define it, would continue to grow at a faster pace over the longer term than our average sales overall as more members engage digitally, and we’re able to use some of those targeted personalized communication tools to help members see the relevancy of all the offers that we have online and also to use those channels to help drive higher engagement into the warehouse as well.”