Club operator expands online order delivery options

ISSAQUAH, Wash. — Costco Wholesale Corp. reported sales and earnings gains for its fiscal fourth quarter and year, and said it has expanded delivery options for its customers.

The warehouse club operator said that its net sales for the 17-week fourth quarter ended September 3 were $41.36 billion, an increase of 15.8% compared to the comparable period last year.  Net sales for the 53-week fiscal year were $126.17 billion, an increase of 8.7% over the $116.07 billion reported in the 52-week fiscal year of 2016.

Costco also reported net sales of $12.40 billion for the five weeks ended October 1, an increase of 12.1% over the $11.06 billion recorded during the similar period last year. Comparable sales for the company advanced 8.9% in September, 6.1% for the fourth quarter and 4.1% for the fiscal year. E-commerce sales advanced 21% in the quarter and 13% in the year.

Net income for the 17-week fourth quarter was $919 million, up from $779 million last year. For the 53-week fiscal year, net income was was $2.68 billion, compared to $2.35 billion in the 52-week fiscal year that ended in August 2016.

Despite the sales and profit results that beat expectations, though, Costco’s shares fell in early morning trading on Friday. The company’s gross margins contracted in the fourth quarter, fueling concerns that the warehouse club operator faced increased competition from Amazon.com and other retailers.

Costco chief financial officer Richard Galanti said in a conference call Thursday night that the company’s brick-and-mortar business is “as strong as it’s ever been,” and added that the company is expanding its online offerings. It has introduced a service called CostcoGrocery, free for orders of more than $75, that allows Costco members to choose from about 500 nonperishable grocery and other products, and have them delivered in two days via UPS. CostcoGrocery is available throughout the continental United States, according to the company. Costco has also expanded its same-day delivery of products, including perishable groceries, though Instacart.

Costco ended its 2017 fiscal year with 741 warehouse clubs in operation, including 514 in the United States and Puerto Rico, 97 in Canada, 37 in Mexico, 28 in the United Kingdom, 26 in Japan, 13 in Korea, 13 in Taiwan, nine in Australia, two in Spain, one in France and one in Iceland. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.