Costco's net sales rose, but its sales of fresh foods suffered in Q3 2023, Costco Chief Financial Officer Richard Galanti said on the company's quarterly earnings call.
The Seattle, Washington, U.S.A.-based retailer, which operates 847 stores globally, said its net sales increased 8.1 percent to USD 53.44 billion (EUR 50 billion) compared to the same quarter in fiscal-year 2022. Its store traffic increased 3.9 percent worldwide and up 2.2 percent in the U.S., while the average transaction size jumped 6.9 percent in the U.S.
However, fresh food sales declined, Galanti said, while declining to reveal the amount of the drop.
“As you know, for the last couple of years, it's been particularly strong, and it's come down a little bit. In addition, we are looking to hold prices on some of those price points despite inflated costs in some of the fresh food categories,” Galanti said.
Costco has benefitted from “a dramatic improvement in shipping times and much lower shipping and container costs,” Galanti noted, which led to price decreases to its members.
“Over a year after Covid began, you will recall that the supply chain challenges related to shortages of the containers and shipping delays greatly intensified with container freight and shipping rate skyrocketing,” Galanti said.
In the fourth quarter of 2021, the retailer leased three ships and several thousand containers to help mitigate shipping challenges. Later, Costco added four additional vessels and additional containers with commitments for up to three years.
“Our objectives at the time were twofold. First, to increase the ability for more timely shipping and arrival of overseas merchandise. This allowed us to better stay in stock and drive sales; and second, to reduce some of the skyrocketing shipping and associated container costs,” Galanti said. “We achieved those objectives for a period of time.”
Over the course of a year and a half, Costco “controlled the shipping and delivery of nearly 50,000 containers, many that would have been greatly delayed and at an estimated savings as compared to the then-current shipping container costs of somewhere between USD 1,000 [EUR 942] and USD 2,000 [EUR 1,885] per container,” Galanti noted.
“Now, with a dramatic improvement in shipping times and much lower shipping and container costs, it made sense to downsize our commitment and lower prices for our members,” Galanti said.
Photo courtesy of The Image Party
