Costco Continues To Thrive Despite A Challenging Business Environment
At A Glance
- Costco Wholesale announced an increase of 16% in its net sales to $222.7 billion
- Costco expanded its operations to Sweden and New Zealand
- Membership fee revenue was up 9% in the fiscal year 2022
- Costco’s eight websites furthered nationwide with 10% sales growth in the fiscal year 2022
- Costo’s Kirkland Signature brand demonstrated solid global growth in 2022
Costco Wholesale wrapped up its FY 2022 results, announcing an increase of 16% in its net sales to $222.7 billion. This growth was fueled by a 14% rise in comparable sales as well as sales at new warehouses that opened in 2021 and 2022.
With the pandemic slowing, Costco was able to accelerate the opening of business centers and warehouses, both domestically and internationally. Costco opened 26 additional warehouses this year, including three relocations, compared to 22 new warehouses in 2021, including two relocations. The 26 new warehouses included 14 in the United States, two in the Canadian segment, and seven in the international division.
Following the end of the fiscal year 2022, Costco expanded its operations to Sweden and New Zealand. In fiscal 2022, Costco reported strong operating results. Net income was $5.8 billion for the 52-week fiscal year, representing a 17% growth compared to $5.01 billion in 2021.
Membership fee revenue was up 9% in the fiscal year 2022, owing to new member sign-ups and executive membership upgrades. Member renewal rates in the United States and Canada were 93% at the end of 2022 and 90% globally. Renewal rates continue to benefit from increased auto-renewal of members and improved penetration of executive members, who renew at a higher rate on average.
“In terms of membership fees and a possible increase, there are no specific plans regarding a fee increase at this time,” Costco’s CFO Richard Galanti mentioned during the fourth quarter earnings release conference. “We’re pleased with our growth in top-line sales and membership households over the last several quarters, and member loyalty is reflected in increasing member renewal rates.”
Specifically, on the eCommerce front, Costco’s eight websites furthered nationwide with 10% sales growth in the fiscal year 2022. This growth was on top of the 44% rise witnessed in 2021. The majority of that rise can be attributed to items like TVs, furniture, appliances, mattresses, and exercise and patio equipment, where Costco's enhanced big and bulky delivery capacity improves its value and service.
“Costco continues to focus on complementing the core warehouse business with eCommerce offerings, with expanded selection in home furnishings, consumer electronics, lawn and garden, health and beauty, apparel, and two-day delivery,” said Costco’s Chief Executive Officer, Craig Jelinek in his annual report note to the stakeholders “Costco Next provides members the option to digitally purchase an expanded selection of products directly from vendors at a great value.”
Regarding inflation, Costco believes there is a light at the end of the tunnel. Despite pressures due to supply chain disruptions, higher transportation costs, higher wages, and higher commodity prices, Costco can see minor improvements in some areas. A few commodity prices, like steel, gas, and beef, among others, are coming down. Additionally, there is a little relief when it comes to container prices. All in all, amid current inflation levels, Costco continues to remain competitive and can also increase prices when the cost rises, keeping prices competitive with respect to the market.
Furthermore, Costo’s Kirkland Signature brand demonstrated solid global growth in 2022. With the brand, Costco continued to focus on crucial priorities, be it offering new items, improving quality, or providing cost savings. Generally, the supply chain has also seen improvements, including on-time deliveries. Costco is not facing any container shortages or significant capacity issues. Port delays have also improved slightly.
Through the years, Costco has kept its mission the same - to provide its members with quality goods and services at the lowest prices. With this mission, Costco continues to thrive despite a challenging business environment.