Costco_warehouse_club-banner.png Costco
Costco Wholesale saw comparable-club sales rise 14.6% (excluding fuel and FX) in November, with e-commerce sales jumping 71.3%.

Costco builds holiday sales momentum with strong November

First-quarter preview shows more than 15% net and comp sales growth

Costco Wholesale gave a peek at fiscal 2021 first-quarter results in reporting double-digit sales gains across the board for November.

Net sales for the four weeks ended Nov. 29 rose 15.1% to $15.67 billion from $13.62 billion a year earlier.

Comparable-club sales for November climbed 13.4% overall and were up 14.6% excluding the impact of changes in fuel prices and foreign exchange (FX) rates. By business unit, comp sales gained 12% in the United States (14.2% excluding fuel and forex), 16.4% in Canada (15.8% excluding fuel and FX) and 18.2% internationally (16% excluding fuel and FX). E-commerce sales jumped 71.3% on a comparable basis (70.9% excluding FX).

“Our comp traffic, or frequency, for November was up 5.7% worldwide and 8.4% in the U.S.,” David Sherwood, assistant vice president of finance and investor relations at Costco, said in a conference call. “Worldwide, the average transaction was up 7.2%, which included a net negative impact of 125 basis points from gasoline deflation and FX.”

Costco grocery aisle-nuts.pngFood sales were a catalyst for Costco's November comp results, with more than 20% growth. (Photo courtesy of Costco)

U.S. regions turning in the strongest results for the month were the Southeast, the Northeast and Texas, according to Sherwood.

“Food and sundries were positive low 20s,” he said of category comp-sales performance companywide in November. “Departments with the strongest results were sundries, frozen foods and cooler. Fresh foods were up mid-20s; better-performing departments included meat and produce. Hardlines were positive mid-teens; better performing departments included sporting goods, office supplies and hardware. Softlines were positive mid-teens. Home furnishings, jewelry and small appliances were strong in the month. Ancillary business sales were down mid-teens, primarily due to lower sales and gasoline and food court. Optical was flat, and hearing aids were down slightly.”

Costco previewed first-quarter sales including and excluding the Thanksgiving week. For the 12 weeks ended Nov. 22, net sales came in at $42.35 billion, up 16.9% from $36.24 billion a year ago. Comparable-club sales in the period grew 15.4% year over year and were up 17.1% excluding fuel and FX. In the U.S., 12-week comp sales rose 14.6% (17% excluding fuel and FX), while comps rose 16.2% in Canada (16.8% excluding fuel and FX) and 18.7% internationally (17.7% excluding fuel and FX). E-commerce sales surged 86.4% on a comparable basis (86.2% excluding FX).

In the 13 weeks ended Nov. 29, which included part of the Thanksgiving holiday shopping weekend, net sales advanced 16% to $46.33 billion from $39.95 billion in the prior-year period. Comparable-club sales increased 14.5% year over year and gained 16% excluding fuel and FX. Comp sales escalated 13.4% in the U.S. (15.7% excluding fuel and FX), 16% in Canada (16.4% excluding fuel and FX) and 18.7% internationally (17.5% excluding fuel and FX). E-commerce comp sales climbed 82% (81.7% excluding FX).

Full first-quarter sales and earnings are scheduled to be reported on Dec. 10.

Issaquah, Wash.-based Costco finished the first quarter with 803 warehouse clubs overall, compared with 785 a year earlier. By market, the retailer operates 558 clubs in the U.S. (including Puerto Rico), 102 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 14 in Taiwan, 12 in Australia, three in Spain and one each in Iceland, France and China. Costco also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

Jefferies analyst Stephanie Wissink noted that Costco’s November comp-sales growth topped its 13.4% estimate, which was above Wall Street’s 12.4% forecast.

“Food continues to anchor comp sales at positive low/mid-20s in November, consistent with October,” Wissink wrote in a research note. “Hardlines saw a notable deceleration from positive mid-20s to positive mid-teens, with sporting goods, office and hardware overindexing. We estimate the slowdown in hardlines, which was 16% of net sales in fiscal 2019, was likely a 1% to 2% comp headwind. Softlines remained positive mid-teens, with home, jewelry, and small appliances strong.”

Costco’s softer performance in the last week of November likely reflects the lapping of Black Friday in the reporting period, according to Wissink. The traditional holiday shopping kickoff day saw noticeably lesser traffic around the country this year, in large part due to a resurgence of of COVID-19.

“Results imply the last week of November was a -90/-110bps headwind to total/core comps for the 13-week period ending Nov. 29. We believe this slowdown is outsized, given the company is spreading out holiday savings this year in order to ensure a safe shopping experience and provide flexibility and customer value, which could have contributed to a lower year-over-year growth over Black Friday weekend,” she said. “Our channel checks and store observations, as well as third-party data sources, suggest foot traffic was traded for online traffic, and dollars were more evenly distributed across November selling weeks versus concentrated in the final week of the month (versus prior years).”

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