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Sale Growth From Pandemic Shopping For Costco, But Stay-At-Home Orders Prevented Bigger Gains


05/29/2020


Sale Growth From Pandemic Shopping For Costco, But Stay-At-Home Orders Prevented Bigger Gains
There was a surge in the business of Costco in the early weeks of the pandemic with consumers rushing to stick up essentials in bulk in anticipation of lockdowns.
 
However there was a drop in sales of the retailer in the month of April because of the stay-at-home orders and social distancing norms imposed to prevent the spread of the novel coronavirus pandemic, said the retailer. 
 
Currently the company has made it mandatory for its customers to wear masks and and closed down some of its departments such as optical and hearing aid centers for the time being
 
As customers bought huge packs of toilet paper, cases of bottled water and bulk grocery items during the coronavirus pandemic, the company’s sales grew in the fiscal third quarter, Costco said. However as governments ordered stay at home measures to be impose,d there was a drop in sales.
 
The company reported earnings per share of $1.89 against revenues of $37.27 billion for the fiscal third quarter ended May 10. The company also reported a 4.8 per cent growth in same-store sales.
 
In the five-week period that ended April 5, Costco reported a 9.6 per cent year on year growth in same-store sales as customers rushed to the company’s stores in March to buy essentials, such as large cleaning supplies and groceries.
 
That demand slowed down significantly in April as people were forced to stay indoors. Sales were hurt by “stay-at-home orders, social distancing requirements and some mandatory closures”, said the membership warehouse club in a news release. For the four weeks that ended May 3, its same-store sales fell by 4.7 per cent globally.
 
The impact of the covid-19 crisis meant that the costs for the company were higher even though there was growth in sales. The net income of the company dropped to $838 million, or $1.89 per share, compared to $906 million, or $2.05 per share, a year ago. Earnings were reduced by $283 million, or 47 cents per diluted share, on a pretax basis because of the additional wages and sanitation costs related to the pandemic, the retailer said.
 
There were other factors that also ate into the profits of Costco. There was tendency among consumers to purchase more food and fewer discretionary items, such as luggage or jewelry during the pandemic purchase spree. There was a 64.5 per cent year on year jump in the e-commerce sales of the company for the quarter but that growth was accompanied with additional expenses of supply chain management.
 
There are almost 800 stores of the retailer in the world which includes 547 in the United States.  The company’s Chief Financial Officer Richard Galanti said in an earnings call that just like all other retailers during the pandemic, there were fewer visits of people to the stores but they purchased much more than on the average when they shopped. The company has “been fortunate that we’ve been open” he said and added that it has a layout that makes people feel safer.
 
“When you talk to people anecdotally, they feel frankly more comfortable coming into a Costco which is bigger, more wide open, with certainly the six feet apart that we’re all doing,” he said.
 
(Source:www.cnbc.com)


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