COST Costco Wholesale Corporation

By Sarah Nassauer 

The coronavirus stockpiling that cleaned out some Costco shelves in March has cooled.

Costco Wholesale Corp. reported higher sales for its latest quarter, but its growth wasn't as fast as some competitors that were also able to stay open during the pandemic. Comparable sales, those from stores and digital channels operating for at least 12 months, rose 7.8% during the quarter ended May 10. The figure excludes the impact of gasoline sales and currency swings.

Costco's monthly comparable sales fell in April for the first time in over a decade as social distancing rules limited visits and more shoppers stayed home. The retailer also put limits on certain items and restricted how many shoppers could enter a store during the quarter.

During the quarter 4.1% fewer shoppers visited stores but spent an average of 9.3% more per transaction, the company said. Costco has a relatively small e-commerce business, but sales jumped 66% in the quarter.

The company is navigating a new dynamic that includes some shoppers who don't want to go out, and others who still prefer to visit stores but want to feel safe, finance chief Richard Galanti said. The company faced some angry critics after the chain required customers to always wear masks in stores, but overall shoppers like the rule, Mr. Galanti said.

Some shoppers prefer large stores such as Costco "which is bigger, more wide open," he said, and "all we're doing with the mask requirements. There are a few people that don't like it, but most people do."

Walmart Inc., the country's largest retailer by revenue, said sales rose 10% during the quarter ended May. 1. Target Corp.'s sales climbed 10.8% during the quarter. Both retailers said last week they saw a sales surge in stores early in the quarter, and a larger shift to online buying for home delivery or curbside pickup during the end of the quarter.

On Thursday, discount retailers Dollar General Corp. and Dollar Tree Inc. also reported big gains as consumers turned to the companies to stockpile food and other home goods during the Covid-19 pandemic.

Dollar General said same-store sales in the first quarter jumped nearly 22%. The company said demand remained elevated through the bulk of May, but it has seen some moderation more recently.

Dollar General Chief Executive Todd Vasos told investors on an earnings call that government stimulus checks and enhanced unemployment benefits have boosted its customers. "She has a lot more trepidation obviously just because of what's going on, but I would tell you that she still has money in her pocket," he said.

Costco generally serves a higher-net-worth customer that buys in bulk. During the quarter, the company temporarily shut its optical, hearing aid, photo and much of its food court business, but it has started to reopen some of those services in recent weeks and return to normal opening hours, Mr. Galanti said.

Some discretionary spending started to reappear near the end of the quarter, including travel booking, said Mr. Galanti. "Members are now starting to actually book travel again, although generally further out than we have historically seen."

Costco's net income for the quarter hit $838 million, or $1.89 a share, below analyst estimates of $1.95 a share, according to Thomson Reuters. The company's profits were lower by $283 million due to higher worker wages and store cleaning costs related to Covid-19, the company said.

Other chains that temporarily closed in March and April have reported sharp drops in sales, despite switching to online orders. Nordstrom Inc. said sales dropped 40% from the year earlier to $2.03 billion for its quarter that ended May 2. The department store operator said about 40% of its locations are now open.

--Allison Prang contributed to this article.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

May 28, 2020 19:14 ET (23:14 GMT)

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