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Costco Wholesale has been one of the big retail winners in the COVID crisis, but those gains aren’t coming without some pain.
The warehouse chain’s shares were down 3% on Friday after it reported $281 million in COVID-related expenses, notably on sanitizing its stores and giving its employees bonuses, an amount nearly three times what Costco had told investors to expect in June.
“Of course $281 million is over $100 million, and quite a bit larger,” Costco finance chief Richard Galanti conceded to investors on a conference call.
Costco’s revenues rose 12.4% to $53.38 billion in the quarter ended Aug. 30, way more than what Wall Street expected. The big sales surge came from a combination of e-commerce sales increasing by 90.6% and more spending per physical trip, as the company said shopper visits had held steady.
Much of that per trip increase came from big ticket items.
“As people are spending less on travel, air and hotel and dining out, they seem to have redirected some of those dollars to categories like lawn and garden, furniture and mattresses, exercise equipment, bicycles, housewares, cookware, and the like,” Galanti said.
Two of Costco’s big rivals, Kroger and Amazon.com, have received sharp criticism for stopping so-called ‘hazard pay’ for their workers.
In contrast, Galanti said Costco’s continued success is contingent on keeping stores and staff safe, so the company will extend its $2 per hour premium on wages for at least another eight weeks.