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Costco's U.S. comparable sales rose 11.2% in September and were up 8% excluding the impact of fuel and foreign exchange.

Sales growth at Costco moderates in September

Food and grocery categories remain strong comp-sales performers

Costco Wholesale saw sales growth ease in September after tallying bigger gains in the summer months.

For the five weeks ended Oct. 2, net sales climbed 10.1% to $21.46 billion from $19.5 billion a year earlier, Costco reported yesterday after the market close. That compared with 15.8% year-over-year net sales growth in September 2021.

Companywide, comparable-club sales rose 8.5% for September and were up 8.6% excluding changes in gasoline prices and foreign exchange (FX) rates, versus year-ago comp-sales growth of 14.3% (9.4% excluding fuel and FX).

By business unit, September comp sales advanced 11.2% in the United States (8% excluding fuel and FX) and 5.7% in Canada (9.6% excluding fuel and FX) but dipped 1.9% internationally (+11% excluding fuel and FX), Costco said.

September’s results marked a slowdown from August, when Costco generated increases of 11.4% in net sales and 10.1% (8.7% excluding fuel and FX) in total comp sales. In July, the retailer recorded gains of 10.8% in net sales and 10% (7% excluding fuel and FX) in overall comp sales, upholding the growth pace from June, when the company momentum from June, when the company saw net sales surge 20.4% and total comp sales rise 18.1% (13% excluding fuel and FX).

E-commerce sales inched up 0.7% on a comparable basis in September and were up 2.3% excluding FX. That compared with a 3.9% uptick in August (4.8% adjusted) and a September 2021 gain of 10.6% (9.6% adjusted).

“Our comp traffic, or frequency, for September was up 4.7% worldwide and 2.6% in the U.S. There was a slight negative impact to traffic from Hurricane Ian,” David Sherwood, assistant vice president of finance and investor relations at Costco, said in a phone report.

Relative to the U.S. dollar, FX impacted total and comparable sales in September by about 5.3% in Canada and approximately 14.7% internationally. Fuel price inflation lifted overall comp sales by 2.7%, as the average worldwide selling price per gallon ended up 21% higher for September versus a year earlier.

“Worldwide, the average transaction was up 3.7%, which included the benefit from gasoline inflation and the negative impact from FX,” Sherwood added.

U.S. regions and markets turning in the strongest comp-sales results in September were the Midwest, Northwest and San Diego, while the top international performers in comp sales for the month were came from Australia, Spain, the United Kingdom and Mexico, Sherwood reported.

“Inflation in food and sundries was consistent with August, while inflation for fresh was lower year over year when compared to August,” he noted.

Among core categories, food and groceries posted a strong comp-sales showing (excluding the impact of FX) in September.

“Food and sundries were positive in the low double digits. Cooler, candy and frozen foods were the strongest departments. Fresh foods were up mid- to high single digits. Better-performing departments included bakery and produce,” Sherwood said. “Nonfoods increased mid-single digits. Better-performing departments included toys and seasonal, tires, home furnishings, and health and beauty aids. Ancillary business sales were up low 20s. Gas and food court were the top performers.”

Issaquah, Wash.-based Costco now operates 839 warehouse clubs overall, compared with 817 a year ago. By market, the retailer operates 578 clubs in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom, 17 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two apiece in France and China, and one each in Iceland and New Zealand. Costco also runs e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

“September’s core comps were +8.6% and in line with August’s core comps of +8.7%. With September core comps largely in line with August and July on a three-year stack basis (~38%), Costco’s model demonstrates its resiliency as members continue to spend,” Jefferies analyst Corey Tarlowe wrote in a research note late Wednesday.

“We would note that price inflation in food and sundries was consistent with August, while fresh food inflation was lower year over year versus August,” Tarlowe added. “Notably, during Costco’s 4Q ’22 earnings call, management mentioned a slowing in price inflation for gas, steel, corn, beef and more, alluding to a ‘little light at the end of the tunnel.’”

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