Costco’s Comps Continued to Thrive in October despite Competition
Costco reports strong sales in October
Costco (COST) continued with its stellar sales performance in October. The company’s comparable-store sales (or comps) rose 7.5% for the four-week period ending on October 29, 2017. Comps rose 7.0% in the US (SPY), 9.0% in Canada, and 8.2% in other international locations. During the reported period, the company’s net sales registered a growth of 10.1% (year-over-year) to $10.0 billion. Moreover, the company’s sales from its e-commerce arm remained strong and increased 31.0% in October.
Notably, Costco’s monthly sales numbers reflect strong growth over the prior-year period as can be seen in the graph below. During October 2016, the company’s comparable store sales rose 2.0%, while net sales improved 4.0%.
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Excluding the impact of the movement in gasoline prices and currency rates, Costco’s October 2017 comps improved 5.6%. Comps rose 5.9% in the US, 2.8% in Canada, and 7.4% in other international locations.
What drives Costco’s sales?
Costco continues to generate industry-leading comps growth despite increased competition from Walmart (WMT), Amazon (AMZN), and Target (TGT). The company is witnessing higher average transactions and a rise in shopping frequency, which is driving its top-line growth. Meanwhile, Costco’s price investments, the opening of new warehouses, improved membership fee revenues, and increased penetration of executive membership supports its top-line growth rate.
Also, the company is focusing on strengthening its e-commerce business and has recently introduced two-day free delivery of non-perishable items. Plus, the company has expanded its same-day delivery for fresh groceries in partnership with Instacart. These consumer-friendly measures are likely to strengthen the company’s competitive positioning and are expected to drive the company’s sales in coming quarters.