Costco maintains sales, earnings momentum; taps company vet as new chief merchant
Costco Wholesale Corp.’s second-quarter earnings and sales surged as its successfully met inflation and supply chain pressures.
On the company’s earnings call, CFO Richard Galanti said that Claudine Adamo, previously senior VP, merchandising (non-foods and e-commerce), will become executive VP and chief operating officer of merchandising. The role was previously held by Ron Vachris, who was promoted to president and COO in February.
"Claudine has been with us for 30 years,” Galanti said on the call. “She began in an hourly position in our Kirkland warehouse in 1992, 30 years ago but a year later came into buying and has been in buying ever since and most recently was senior VP of nonfoods sales — of nonfoods merchandising.”
Costco’s net income totaled $1.3 billion, or $2.92 earnings per share, for the quarter ended Feb. 13, compared to net income of $951 million, or $2.14 per share (which included $246 million pretax, $0.41 per diluted share, in costs incurred primarily from COVID-19 premium wages) in the year-ago period.
Net income for the first 24 weeks was $2.62 billion, or $5.90 per diluted share, compared to $2.12 billion, $4.76 per diluted share, last year.
Net sales rose 16.1% to $50.94 billion, from $43.89 billion last year. Total comp sales increased 14.4%, and were up 15.8% in the U.S. Excluding fuel and currency impacts, total comp sales rose 11.1%.
Traffic or shopping frequency was up 8.3% year-over-year in the U.S. Costco's average U.S. transaction rose 4.6%.
Membership fee income came in at $967 million for the second quarter, up $86 million or up 9.8% from a year earlier, $881 million. At second quarter end, Costco's U.S. and Canada renewal rate stood at 92%, up 0.4 percentage point from the 12-week earlier at Q1 end.
inflationary/supply chain pressures that Costco is seeing include higher labor costs, higher freight costs, as well as higher transportation demand, along with container shortages and port delays.
On the call, Galanti told analysts that the company is seeing higher labor costs, higher freight costs, higher transportation demand as well as container shortages and port delays. It also is seeing various shortages and higher commodity prices in a range of items.
I want to give another shout-out to the job that our merchants and our traffic department “and operators have all been able to do to keep — in order to keep the products that we need, pivot when and where necessary, keep our warehouses full, keeping prices as low as we can for our members and continue to show great value versus our competitors," Galanti said.
Costco currently operates 828 warehouses, including 572 in the United States and Puerto Rico, 105 in Canada, 40 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two each in France and China, and one in Iceland. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.