Apparel helps boost Costco second quarter
ISSAQUAH, WASH. —Costco shrugged off a weak economy with another strong quarter and reported a surprising gain in apparel sales driven by the arrival of new name brands.
Net income for the quarter, ended Feb. 17, increased 31% to $327.9 million with total sales of $17 billion, compared to $15.1 billion last year .Same-store sales were also strong, increasing 7% overall and 5% in the United States. Costco cfo and evp Richard Galanti told analysts during a March 5 conference call that Costco “feels pretty good about our bottom line and our margin initiatives” for the quarter, and said category sales reflected overall trends.
“Overall, we’ve seen weakness where you would expect it in this type of economy,” he said. “And that weakness has been in things like home furnishings, jewelry and other discretionary items.”
The uncertain economy has even impacted sales of some fresh foods, though food continued to be one of the strongest areas for Costco during the quarter. “We’ve even seen it in meat, with a slight shift the past few months from beef to chicken,” said Galanti.
On the positive side, Costco said one of its strongest categories for the quarter was women’s apparel as vendors suffering weak sales at high-end department stores shifted their attention to Costco.
“Women’s apparel has been strong and that’s been due to the availability of more name brands,” said Galanti. “We’re carrying brands now that historically would not sell to us.” Brands now selling at Costco include high-end names like Hurley, Janzen and Oshkosh.
Stores also reported strong sales in sporting goods and consumer electronics, with sales of flat-screen TVs driving the category, despite falling prices.
Costco maintained its expansion plans for fiscal 2008, opening seven new stores during the second quarter and 17 stores year to date. For the full year, the chain expects to open 28 or 29 new stores and relocate nine. Sales at international stores continued to outpace those in the United States, rising 17% during the quarter. Galanti noted that sales at stores in Japan received a bump this year by exposure on a popular TV show there that’s considered the equivalent of “Queer Eye for the Straight Guy.”
“Translated literally, it’s a show called ‘Girlie Man’ and the two main characters went on a shopping spree at a Costco during a recent show,” said Galanti. “And we saw a big pick-up in sales after it aired.