What is Costco’s Key to Success in 4Q22?

Oct 4, 2022 | Corporate Insights, No Bull Economics

Costco Banner

•Costco is well positioned as a low-cost provider of consumer goods in a challenging economic environment. The chain keeps prices low by focusing its massive buying power on relatively few SKUs (items) in order to obtain the best prices for its consumers. The company does not seek to maximize its sales margins but rather seeks to drive results by using low prices to grow transactions. 

•Strong fiscal 4Q22 results (ended 8/28/22) included a +10% y/y comp (adjusted for gas & foreign exchange), net sales up +15% y/y and net income up +6.5% y/y (adjusted for an $84MM fiscal 4Q21 write-off).

•Notably, sales from its CostcoGrocery division (including third-party delivery) increased +20% y/y during the quarter.

•Corporate reported a slight improvement in its supply chain as it relates to on-time deliveries and lower container prices.

•Total inventory grew a sizeable +26% y/y during the quarter, including +10% to +11% inflation. Organic +15% inventory growth suggests management’s confidence in going forward sales growth and reveals a strategy to position against future wholesale price increases (with wage inflation likely to stick long-term).

•Corporate reported an increase in competitive promotional activity, indicative of supply chain improvements.

•While Costco does not seek to “harvest margins”, its strategy is to subsidize “hot dogs & soda” with current excess profits on gasoline and travel sales.     

Costco Financials Chart
Costco Financials Chart

Follow us on LinkedInTwitterFacebook, and YouTube!

Disclaimer of Liability
No Bull Economics
Restaurant Research

Email Sign-up

Jack in the Box Corporate Insights

Jack in the Box results reflected an improvement in: dining room openings (60% of system); innovation, upsell & add-ons sales; digital progress which is helping frequency; and late-night.

How to Circumvent Food Shortages?

The vulnerabilities of a long-distance supply chain have become very evident over the last couple of years, especially when it comes to farming.

This Week in Summary 11/18/2022

We want to spotlight Target this week which provides valuable insight on consumer spending.

How Would You Value the Federal Reserve?

Here is an idea: let’s take the Federal Reserve public in the world’s largest IPO.

How to Pass Along Inflationary Costs Without Losing Traffic?

Wendy’s is avoiding standardized menu price increases and turning to strategic increases designed not to price out lower income consumers.

Investors in Retail Stocks Think Consumers are Back

Recent retail stock gains would suggest that investors are confident in consumer strength, despite continuing inflationary issues.

Papa John’s & Chili’s Reveal the Plight of Cash Strapped Consumers

The relevant question remains whether consumers who are increasingly cash-strapped can be convinced to pay more for higher quality levels?

This Week in Summary 11/11/2022

Market melt up & the midterm elections

DoorDash’s Grip on Labor Costs is Funding New Investments

Doordash’s platform generated +10% of all restaurant industry sales.

3Q Results for Bloomin’, Texas Roadhouse & Cheesecake

Full serve restaurant sales performance is currently a function of customer demographics.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company