Why Costco's sales have dropped
Wholesale retailer Costco said its net sales fell more than expected in April. Janet Babin explains why.
A Costco customer pushes her shopping cart by a display of televisions at a Costco warehouse store in Richmond, Calif. (Justin Sullivan/Getty Images)
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Tess Vigeland: Apparently we all did a little more shopping last month than we've been doing. Thompson-Reuters reports that retail sales rose more than a percent in April over last year. Walmart posted a sales gain of 5 percent. But in this economy even good news needs to be taken with a grain of salt. And we've got that too. Same-store sales at discount mecca Costco dropped more than expected last month. A lot more. From North Carolina Public Radio, Janet Babin explains.
JANET BABIN: You were supposed to be stocking up paper towels and dish soap. But now you're leaving Costco with a $300 propane patio heater. Well, hey, it does get chilly at night, and it was 70 percent off retail. Britt Beemer with America's Research Group says that's how Costco makes its money.
Britt Beemer: Costco has been brilliant in their merchandising of giving consumers incredible deals on things that they may not need to buy but things they may want to buy.
Like patio heaters, flat screen TVs and a case of Bordeaux. But that's changing. Costco's same store sales dropped 8 percent in April.
Beemer: The consumer today according to our research is not buying anything other than what they have to have.
Costco's earning also took a hit because it sells a lot of gas and prices have cratered since last year. And the company has a lot of stores in the Southwest. Edward Weller is an analyst with ThinkEquity Partners.
Ed Weller: They are wildly overexposed to California and the West. That could amount to almost a third of the business in the United States and that biz has been flattish to downish for some time now.
Instead of shopping, many consumers are home trying to pay down credit-card bills. They're worried about losing their jobs. But Britt Beemer says none of us is immune to a good deal.
Beemer: Even though consumers are strapped today, Americans can still be lured into stores if the price is low enough.
The question is, how much lower can Costco go?
I'm Janet Babin for Marketplace.
Comments
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From San Antonio, TX, 06/14/2009
Costco will never put a express lane in their stores. We want you to go in and purchase more than a sinlge item. If you want express lane go to walmart. Walmart express lane takes more time than the costco lane.
From Brazil, 05/15/2009
Dear Sirs,
Can you send me some information about your company. Our contact in the USA is Progressive International Trading(North Carolina)
Respectfully
Michael Wieser
05/08/2009
I would be interested to know what impact, if any, the membership fee is having on Costco. Given the pull back by the consumer, is Costco losing members(ones who don't renew their membership)in greater numbers than previous years...due to the $50-$100 membership fee?
From Burlington, VT, 05/08/2009
Here's an easier fix: put in an express lane! I am single, and run out of bulk basics like paper goods very rarely. But if they had an express lane, I would go up more often for cheaper munchies that have to be bought in real time. Thanks for the fresh food -- now get in a fresh food set-up!
From NC, 05/08/2009
Story ends with the question "how low can they (prices at Costco) go?" I would love to read your next story about exactly that question. What are Costco's margins? Are wholesale prices falling? Is there a glut of non-essential merchandise sitting in warehouses or in shipping containers around the world?
From Brooklyn, NY, 05/07/2009
Whther it was completely intentional or not Janet Babin's choice of a Propane Patio heater as the consumerist impulse buy really was dead on. Since they have appeared I have been wondering what motherless creature was spawned with the sole energy wasting intention of Heating the Outdoors! Makes as much sense as those idiotic stores which leave their doors open in the summer. Please stop the insanity!
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