Costco Wholesale Corporation on Wednesday reported first quarter fiscal 2017 total revenue that fell short of Zacks Consensus Estimate analyst expectations for the eighth straight quarter, hitting $28.1 billion compared to estimates for $28.4 billion.
The warehouse club’s net sales were up 3% to $27.47 million from $26.63 million in the year-ago period. U.S. same-store sales increased 1%, hit by the strong U.S. dollar and slightly by gas price deflation for a combined negative impact to the reported comp number of about 0.75% of sales, Costco CFO Richard Galanti said in a conference call with analysts.
Costco's Q1 membership fees rose 6% and added 6 basis points as a percent of sales, up $37 million year-over-year. Renewal rates were strong at 90% in the U.S., 90.3% in Canada and 88% worldwide.
Costco is steadily continuing its emergence out of slumping sales and its messy credit card switch from American Express to its new Citi store card with first quarter results that missed Wall Street expectations, stung by lower food and gas prices.
November’s sales and traffic in particular were “choppy,” especially during the week of the election, Galanti said during Wednesday's analyst call, according to a transcript from Seeking Alpha.
In terms of merchandise categories for the quarter, sales of food and sundries were flat year-over-year, with spirits, sundries and deli coming in best. Tobacco sales continued to trend down in the quarter, falling a little more than 20% year over year. Hardware, tires, and health and beauty aids posted strong results: For November, TV sales in dollars were up 2% and units were up 17%, an indication of price deflation even in that category, Galanti said.
Sales of softlines were up in the low single digits, Galanti said, with apparel, small electronics and special events being the standouts. In fresh foods, produce and deli were the strongest departments.
Costco is working to invest more in e-commerce in order to improve areas like search, with added focus on merchandising and pricing as well, Galanti said. In response to a question from Cowen & Co.’s Oliver Chen regarding Amazon Go, the e-commerce giant's checkout-free grocery store pilot, Galanti said Costco implemented a radio-frequency scan-and-go checkout system two decades ago and has offered self-checkout kiosks for years.
“Needless to say, there's a lot more efficient things today,” Galanti added. “We continue to look at scan-and-go-type things. We are not testing it currently, but we are looking at it. And I’m not suggesting we are going to do it … We’ve chosen to not do self-checkout and higher volume units because we get people through without it.”