Dive Brief:

• Costco recorded a 17% increase in U.S. comparable-store sales, not including fuel, during the first quarter of 2021, the retailer reported Thursday. Net sales rose 16.9% over the same period in 2019, to $42.35 billion.
• E-commerce sales rose 86.2% in Q1, which ended Nov. 22, while net income for the quarter was $2.62 per diluted share, a 37.9% year-over-year increase.
• Costco’s sales are surging, and its profitability is up even as other retailers see some of the air come out of their results as the pandemic endures.

Dive Insight:

Costco’s latest results suggest the retailer is in an enviable position as large numbers of shoppers continue to visit its stores to stock up, where they often wind up making incremental purchases as they traverse the aisles.

Costco's comparable-store sales growth in Q1 was significantly higher than the last quarter of 2020. U.S. comp sales, excluding fuel, were up 13.6% for that period, while net sales in Q4 had risen 12.5% on a year-over-year basis.

Foot traffic at Costco’s stores, which was down sharply earlier in the year, was up 4% in October and 6.6% the week of Nov. 16, according to data from Placer.ai, which measures store visits using cellphone data.

"People clearly are coming in to buy food and key cleaning items and health and beauty aids," Costco Chief Financial Officer Richard Galanti said during the retailer’s earnings call Thursday. "That gets you in the door. And certainly, in our view, given that money [that would be] spent on other things in normal years perhaps is being spent more for things for the home, we have that as well."

Another factor that has helped Costco’s results is that spoilage and labor productivity have both improved, Galanti said.

Grocery purchases were a key driver behind Costco’s robust digital results during the quarter. Online grocery sales were up nearly 300% during the period, and the company’s overall e-commerce sales jumped by just over 100% when Instacart sales are taken into account, according to Galanti.

In response to a question from an analyst, Galanti reiterated that Costco does not have plans to extend pickup at its locations even though retailers, including rivals like BJ’s Wholesale Club and Sam’s Club, have been quickly scaling that service. Costco doesn't offer curbside pickup and only offers in-store pickup for a limited selection of high-priced items.

"We are not rethinking it. We continue to look at it and scratch our heads a little bit. But at this juncture we don’t have any current plan to do so," Galanti said.

Galanti offered a bit more insight when answering a separate question about the company’s e-commerce strategy. "Ultimately, we still want our members to come into the warehouse. When they come in, they see the items and they are more likely to buy some of those items and certainly, driving them with great value and great quality is what we are all about," Galanti said. 

Galanti also said the majority of Costco’s pharmacies plan to administer COVID-19 vaccines during the second phase of the federal government’s effort to inoculate people against the virus. 

Correction: A previous version of this story misstated Costco's traffic growth for the week of Nov. 16. The actual growth rate for that period was 6.6%.