USA- Retail giant Costco has reported total revenues of US$58.52 billion for Q1 2024, exceeding analyst estimates of US$58.07 and profits of US$3.78 per share compared to analyst estimates of US$3.70 as customers swarm the company’s warehouses to buy cheap discretionary items.
The retailer’s total revenues increased by 9.1% in the reported quarter. Total comparable sales also increased by 6.5% compared to 3.5% in the same quarter last year.
The company attributed this strong performance to increased momentum in discretionary items and groceries following price reductions.
Costco’s CFO Gary Millerchip said, “As inflation has leveled off, members are returning to purchasing more discretionary items, with growth led by toys, furnishing, lawn and garden supplies as well as health and beauty aids products.”
The retailer reported increased volumes in its bakery items and fresh food category, more so newly added products as inflation-burdened consumers prefer cooking meals at home.
Costco’s performance is a show of resilience and ability to adapt to the market. The cheap discretionary items offered at wholesale outlets is the company’s response to a dwindling retail market increasingly on the lookout for value deals.
Costco’s wholesale visits increased by 8.9% on a year-on-year basis in the reported quarter while visits to competitors Target and Walmart increased by 3.5% and 3.9% respectively. The difference represents Costco’s focus on offering consumers value within its retail wing through these deals.
Walmart also reported a surprise 15.38% increase in total revenue, translating to quarterly earnings of US$0.60 per share, beating Wall Street estimates of US$0.52 per share. However, this increase was due to product diversification and expansion of Walmart’s digital business.
Market analysts have lauded the cheap discretionary items offering as the secret to the reported performance, a reward for consistency.
Scott Ciccarelli, a senior analyst at Truist Securities, said, “In a world where most retailers have suffered from some sort of volatility or pocket of softness, Costco is a rare beacon of consistency.”
However, the company has revealed the value deal strategy is merely a short-term response to the current market dynamics.
As inflation continues to level off, Costco plans to increase its presence in the digital retail market, which is a major aspect of the company’s growth strategy.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. HERE
