By Sarah Nassauer
A key measure of sales at Costco Wholesale Corp. fell for the
first time in nearly six years, as the strong dollar and low
gasoline prices ate away at the retailer's revenue from
international stores and gas pumps.
Comparable-store sales fell 1% for the three months ended May
10, the first quarterly drop for the warehouse-club retailer since
2009. International sales dropped 6%. U.S. sales inched up 1%.
The tepid sales numbers are out of character for Costco, which
has been a rare consistent bright spot in the retail landscape for
years. Gasoline prices and currencies are factors over which the
company has little control. But Costco's exposure could grow in the
years ahead as it adds fueling stations to more of its stores and
builds up its international presence.
Shares of Costco, which is the second largest U.S. retailer
after Wal-Mart Stores Inc., fell 0.8% to $144.26 in Thursday
trading.
Profit rose to $516 million in the third quarter from $473
million a year earlier. Total revenue rose to $26.1 billion from
$25.8 billion a year earlier.
Underlying traffic was strong. Without the impact of gasoline
and foreign currency fluctuations, sales at stores open for at
least a year jumped 6%, outshining Wal-Mart and some other
competitors. Costco drew more shoppers to its stores, and the
average amount spent on each trip increased about 2.5%, excluding
gasoline and currency fluctuations
Unlike traditional retailers, Costco's primary source of profit
is membership fees, not sales in stores. Sales of memberships rose
to $584 million from $561 million a year earlier.
Membership revenue evens out fluctuations in sales and allows
Costco to offer discounted products from large screen TVs to
organic string cheese, drawing more people to its stores.
Costco is one of the largest sellers of gasoline in the U.S. It
plans to add more pumps to stores around the world, executives
said. Selling inexpensive gas brings in people who then buy other
items during their trips and boosts membership. Gas accounted for
about 10% of Costco's sales in the third quarter, Chief Financial
Officer Richard Galanti said on an earnings call.
The company is opening as many stores outside the U.S. as it is
in the country, gradually increasing the percentage of its sales
that come from international locations. International sales,
including Canada, account for about 30% of the total, according to
company filings.
Costco now has 673 membership warehouses around the world. Those
outside the U.S. are primarily in Canada, Mexico and the U.K. The
company said it plans to open 14 new warehouse stores before the
end of August, half in the U.S. and half international.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
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