Costco Keeps Drawing Homebound Shoppers

Big-box retailers including Walmart Inc. and Target Corp. have generally fared well amid the coronavirus crisis, offering pandemic-weary shoppers one-stop shopping and in some cases, easy buy online, pick up in store parking lot options.

Costco’s shoppers, who pay a membership fee to shop, are spending less on travel and eating out during the pandemic and more on food, appliances, homegoods and other items, said finance chief Richard Galanti on a call with analysts Thursday. “They seem to have redirected some of those dollars,” he said.

Profit also rose during the quarter to $1.17 billion, up from $844 million in the same period last year. Costco raised wages during the quarter due to Covid-19, adding about $212 million in costs for the period, said Mr. Galanti. But the company boosted profits elsewhere, for example selling more food by reducing spoilage, he said. Costco has extended premium wages through January, he said.

Revenue grew to $43.2 billion in the quarter, from $37 billion a year earlier.

For online orders, Costco is currently struggling with some shipping delays, said Mr. Galanti, as e-commerce sales rise dramatically during the holiday season, straining delivery capacity.

Costco has adjusted its stated delivery windows and is warning shoppers on its website, he said. It also has begun selling several hundred nonfood items such as AirPods and Instant Pots through Instacart, making them available for same-day delivery. Typically Costco would only offer grocery items through Instacart.

Due to Covid-19 surges in some regions, the retailer continues to limit store capacity in some areas and is trying to build inventory for fast-selling items “that aren’t going to go out of style,” such as toilet paper, paper towels and cleaning wipes, said Mr. Galanti. “Although, then you get the next rush of spiking and whatever extra inventory you had, it goes away pretty quickly,” he said.

Costco doesn’t plan to join its competitors by offering more ways to buy products online to pick up in stores or parking lots anytime soon, said Mr. Galanti, mirroring longstanding skepticism from the company on the financial merits of the concept. It generally costs more for a retailer to sell online versus in a store. “We continue to look at it and scratch our heads a little bit,” he said. “We don’t have any current plan to do so.”

Write to Sarah Nassauer at [email protected]