Weatherproofed Retail? Costco's Q1 Rises Despite Poor Weather
By Hannah Ash, contributing writer
Many of the nation’s leading retailers, including Walmart, posted less than spectacular results for the first quarter, citing bad weather. Stating that bad roads kept customers away was a logical explanation, especially as sales for delivery-based and online retailers such as Amazon improved. For the nation’s leading bulk club chain, however, the winter blues didn’t make their way to one retailer’s large showrooms: Costco announced it saw a slight increase in profits for this year’s first quarter in comparison to the previous year’s Q1.
According to Walmart chief executive officer Douglas McMillion, "Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected.” Though Costco isn’t posting huge profit increases, any gains for what was such a rough retail quarter are significant to note. In-store sales for the discount chain rose six percent over the previous year’s Q1: absent from Costco’s earnings reports was any mention of the weather. The Costco report focused on growth.
Possible causes for Costco’s growth have been cited as a no-frills approach to the art of retail, with the company minimizing expenses on all fronts (advertising budgets don’t quite exist while employee and customer loyalty appear to be of the utmost importance to the successful retailer). That Costco caters to a slightly higher income clientele could be another important reason as to why it has been less affected by inclement weather and recent reductions to food stamp benefits also could contribute to the difference between Costco and Walmart.
According to chief financial officer Richard Galanti, “I don’t think you need to be an economist to understand that our demographic has probably been impacted less than the lower demographic retailers.” Indeed, Walmart and some of its dollar-store competitors have complained of food-stamp cuts hurting their bottom line because customers have fewer resources to spend at their stores. Another key difference, however, could be Costco’s online channels. Despite Amazon Pantry and Groupon Basic's recent initiatives, the retailer faces less competition in the bulk sales niche. In typical Costco fashion, the discount retailer is being cautious in its omni-channel marketing and spending, with the CFO stating they are exploring same-day deal providers including Livingsocial and Groupon to increase membership, however, Gallanti was clear in stating, “we’re not going crazy here. We’re taking baby steps, but some of this stuff works.”