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Costco's Sales Growth Continues With Strong E-Commerce Numbers

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Costco, announcing results for the quarter that ended Feb. 18, said net sales had increased 10.8%, to $32.3 billion. For the first 24 weeks of 2018, sales increased 12.0%, to $63.4 billion.

A shift in the calendar caused pre-Thanksgiving and Black Friday sales to move into the first quarter this year, which impacted the second quarter by about 1.4% in the United States, according to management. It also adversely impacted e-commerce sales by about 7-8%.

Earnings per share rose 21% without the benefit of the new tax laws, to $1.42 per share, from $1.17. However, with the benefit of the new tax laws, the company reported earnings per share of $1.59. Reported income for the 24 weeks, including the tax benefits, was $1.34 billion, or $3.04 per diluted share, compared with $1.06 billion, or $2.41 per diluted share, in 2017.

As mentioned above, the calendar shift of Thanksgiving and Black Friday into the first quarter had a significant impact on e-commerce business. While total internet sales were up an impressive 28.5% in the quarter, e-commerce increased by 35% for the overall 24-week period.

Costco has been more focused on its online business, and it’s clearly paying off. I noticed that many of the items now featured in the company’s monthly sales promotions are also available on the internet. And the company now highlights availability of many of its online sale items in its mailings, and it has strengthened its internet visibility.

The company also reported sales for the month ended March 4. Total sales increased 12.8%, from $9.1 billion to $10.2 billion. Management noted that these sales were affected by the Lunar New Year/Chinese New Year, which occurred in February, compared with January last year. It impacted February sales by about 4.5%.

Costco now operates 749 warehouses: 519 in the United States and Puerto Rico, 98 in Canada, 38 in Mexico, 28 in the United Kingdom, 26 in Japan, 14 in South Korea, 13 in Taiwan, nine in Australia, two in Spain, and one in each of Iceland and France. The company operates an e-commerce business in the U.S., Canada, the United Kingdom, Mexico, South Korea and Taiwan.

While the calendar shift may have moved some results over these two quarters, I continue to be excited about the company’s growth and like that it pays attention to quality and customer service. Costco has carved out a powerful market position with a limited assortment well tailored to what the customer wants, and that should support its continued success.