Pandemic shopping pushes Costco to a record profit, but also raises costs by millions

The Covid-19 pandemic fueled a surge in shopping at Costco in its most recent quarter, lifting its annual profit above $4 billion for the first time. But it...

Posted: Sep 25, 2020 12:26 PM

The Covid-19 pandemic fueled a surge in shopping at Costco in its most recent quarter, lifting its annual profit above $4 billion for the first time. But it wasn't all good news for the big box retailer.

The company also said that it spent an additional $281 million in the 16 weeks ending August 30 on things like hazard pay for its employees, and increased sanitation costs and other safety protocols.

That increased expense and its impact on profit margins sent shares of Costco lower in early trading Friday. Shares were down even though results released late Thursday topped Wall Street estimates and prompted several analysts to raise their price target for the stock.

Pandemic shopping has also bolstered Costco's competitors, including Sam's Club and BJ's Wholesale. Those club retailers as well as stores like Walmart, Target and Home Depot, were deemed essential businesses when the shutdowns began. "Non-essential" retailers, such as traditional department stores and clothing retailers, meanwhile, have been devastated.

For the most part, Costco had a very strong quarter. Shoppers spent a record $52.3 billion, up nearly $6 billion from a year earlier. Sales at stores open at least a year jumped 14% excluding the impact of lower gas prices and changes in exchange rates for foreign stores. And online sales nearly doubled, rising 90%.

There were actually fewer shoppers in the stores, but they spent significantly more, stocking up on everything from food and paper supplies to patio furniture. The demand for that kind of discretionary purchases caught executives by surprise.

"We expected fresh food and sundries and paper goods and the like ... strong, particularly food because of ... people [not] dining out," said CFO Richard Galanti. But he said that the company had cut back on orders for things like patio furniture in March and April, thinking sales would be off. When they rose instead, "very quickly, we were having to scramble for more of those."

He said the company also had great sales of electronics and that "numbers would be better if there was greater supply."

Indiana Coronavirus Cases

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Cases: 300913

Reported Deaths: 5332
CountyCasesDeaths
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Allen17299290
Elkhart16665212
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Ohio Coronavirus Cases

Data is updated nightly.

Cases: 363304

Reported Deaths: 6020
CountyCasesDeaths
Franklin49267665
Cuyahoga35214736
Hamilton29462371
Montgomery19636225
Butler14472144
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Summit12962310
Stark8529197
Warren798975
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Lorain623697
Clermont563946
Delaware540335
Licking535875
Fairfield523763
Trumbull5159144
Greene510563
Clark501064
Allen460685
Marion457751
Wood4394107
Medina428654
Miami416465
Pickaway396448
Columbiana339597
Portage334471
Tuscarawas317557
Wayne314993
Richland306732
Mercer284737
Ross239259
Hancock232736
Muskingum231910
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Putnam221449
Erie217165
Darke217058
Ashtabula215753
Geauga197351
Scioto193615
Union18658
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Shelby184815
Athens18454
Seneca173118
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Madison156218
Sandusky152327
Preble148421
Huron147518
Defiance137921
Holmes137739
Logan123613
Knox122518
Fulton122025
Crawford119116
Ottawa118930
Washington116427
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Jefferson10124
Highland99517
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Jackson90312
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Perry77012
Adams75012
Pike7261
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Gallia70413
Paulding62710
Hocking61011
Noble59722
Carroll44310
Meigs37612
Monroe31021
Morgan2395
Vinton2105
Harrison1913
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