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Why Costco’s Looking at Square Footage Growth in Fiscal 2016

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California warehouse count increases

Costco Wholesale’s (COST) net warehouse count increased by 27 in fiscal 2Q16 to 698, compared to 2Q15. According to Richard Galanti, Chief Financial Officer of Costco, gross square footage rose to 100.7 million square feet in 2Q16, up 4.5% compared to 96.4 million in fiscal 2Q15. The company opened 11 new warehouses in fiscal 1Q16, including seven in the US, and one apiece in Canada, Japan, Spain, and Australia.

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The lone new warehouse in 2Q16 was opened in California. The company derived about 31% of net sales from the California market in fiscal 2015, which ended August 30, 2015. Some of the retailer’s (XRT) (RTH) highest-grossing warehouses are located in the state, perhaps indicating that more warehouses are called for in California. That being said, new warehouse openings could lead to lower sales at existing warehouses.

In contrast, Wal-Mart Stores’ (WMT) Sam’s Club opened seven net new clubs in fiscal 2016, including three in the fourth quarter.

Outlook

Costco’s high-volume business ensures that its sales per square foot are among the highest in the industry. However, the company is looking to widen its presence and market share both in the US (SPY) and abroad. It’s planning a total of 30 net new warehouse club (FXD) openings in fiscal 2016, including seven clubs in 3Q16, and 11 in the fourth quarter. According to Richard Galanti, Costco’s Chief Financial Officer, of the 30 clubs, 21 are expected to be in the US, with three each in Canada and Asia, while one new club is slated to open in the UK, one in Australia, and one in Spain.

Meanwhile, in fiscal 2017, Walmart is looking at ten new clubs in the US, and Burlington Stores (BURL) is looking to add 25 new stores in fiscal 2017.

Continue to the next part for a look at Costco’s memberships.

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