Costco Wholesale Corp. reported that e-commerce sales fell 9.6% in the fiscal second quarter ended Feb. 12 from the same quarter last year. In the first half of its fiscal year, Costco’s e-commerce sales declined 6.8%.
Chief Financial Officer Richard Galanti said speaking to investors on March 2 that the retailer’s “online sales mix” caused the weakness.
“Big-ticket discretionary divisions like majors, home furnishings, small electrics, jewelry, hardware — these were down 15% in the quarter and account for 58% of our e-com revenue,” he said. “By the way, those same departments were down 11% in the warehouse, but they only account for 8% of total inline sales in the warehouse.”
Costco ranks #9 in the Top 1000. The Top 1000 is Digital Commerce 360’s database of North America’s largest online retailers by web sales.
Costco Q2 sales
The retailer reported net income of $1.46 billion for its second fiscal quarter. That’s a 13% increase year over year.
Costco’s net sales increased to $54.24 billion in the second quarter. That’s up 6.5% from $50.94 billion in the year-ago period. Comparable sales in the United States increased 5.7%. For the entire company, comparable sales increased by 5.2%.
Galanti said the retailer’s average order value rose 0.2% globally and 1.9% in the US. Membership renewal rate in the US and Canada increased by 0.01% to 92.6%. It also grew 0.01% globally to 90.5%.
Membership growth remains strong, Galanti said. Costco ended its second quarter with 68.1 million paying household members and 123.0 million cardholders, he said. Both memberships and cardholders saw a year-over-year increase of more than 7%.
Executive members now make up 45% of paying members, he said, and about 73% of revenue worldwide. Executive Membership is a more expensive loyalty program ($120/year) offered by Costco. Galanti said Costco had 30.6 million paid executive memberships at the end of the fiscal second quarter. That’s 630,000 more than at the end of the fiscal first quarter, he said. The other membership is the Gold Star ($60/year) which offers fewer perks for buyers.
Expansion of the camp
Costco opened three warehouses in the fiscal second quarter, Galanti said. Two are in the US and one is in Australia.
Next week, he said, Costco will open its third warehouse in China. The retailer plans to open its fourth and fifth warehouses in China later, he said. In addition, Costco plans to open a total of 27 warehouses in fiscal 2023, including three relocations. Of the 24 all-new Costco warehouses, 14 will be in the United States. The 10 international warehouses include the three in China, as well as the first Costco locations respectively in New Zealand and Sweden, both of which the retailer opened in its fiscal first quarter, according to Galanti.
Costco e-commerce sales
The decline in e-commerce sales in the second quarter was in stark contrast to what Galanti shared with investors during the company’s fiscal first-quarter earnings call in December 2022. Galanti said on the conference call that the retailer had its own after the first quarter two biggest e-commerce sales days in company history: Black Friday and Cyber Monday.
Although Costco reported percentages of its e-commerce sales decline year over year, it didn’t break down dollar amounts or e-commerce penetration of total sales.
Summary of Costco Q2 2023 Earnings
For the second fiscal quarter ended February 12, 2023, Costco reported:
- Total Costco revenue rose 5.2%.
- Net sales increased to $54.23 billion from $50.93 billion in the year-ago quarter.
- US sales rose 5.7%.
- Costco’s e-commerce sales fell 9.6%.
- Membership dues increased to $1.02 billion from $967 million in the year-ago quarter.
For the six months ended February 12, 2023, Costco reported:
- Total Costco revenue rose 5.9%. Net sales increased to $107.67 billion from $100.35 billion in the same period last year.
- US sales rose 7.5%.
- Costco’s e-commerce sales fell 6.8%.
- Membership dues increased to $2.02 billion from $1.91 billion in the same period last year.
Percent changes may not exactly match dollar figures due to rounding.
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