business news in context, analysis with attitude

ice piece on the Huffington Post site about Costco's most recent fiscal quarter, for which it reported US sales that were up six percent and profit that was "up slightly."

The story continues: "What Costco did not do was spend any time moaning and groaning about the terrible weather in the quarter, setting itself apart from Walmart and many other retail peers. Companies ranging from Macy’s to Home Depot have blamed the weather for poor performance in recent months. Walmart executives said the word 'weather' at least 20 times in their conference call discussing the company’s first-quarter results, by Fortune's recent count."

The story goes on:

"It’s true that the weather was particularly unbearable this past winter (polar vortex anyone?), and many economists have said the super-cold and snow was the main reason the economy shrank in the first quarter for the first time in three years.

"But a handful of popular outlets, like Costco and Chipotle, managed to handle the winter pretty well. That suggests there's more going on here than meteorology.

"Costco's winter survival is a hint that maybe the company’s no-frills model -- which includes almost no advertising, paying workers decently and courting customer loyalty -- may just be a better way to get customers to buy stuff. Costcos generate about $1,100 in sales per square foot, on average, while Walmart and Sam’s Club generate $400 and $680 per square foot, respectively, according to an analysis from Morningstar, an investment research firm.

"Some of Costco's competitors also have other issues than the weather, including inventory problems and Internet competition."

It is interesting that at the same time as this story ran, Bloomberg Businessweek had a story saying that Costco "is grudgingly turning to the Internet in search of more millennials," with CFO Richard Galanti saying that the company is only taking "baby steps."

That story says that "the Web push is as much about defense against such e-commerce giants as Amazon (AMZN) as it is an exercise in business development," and Galanti adds that “we’re open-minded, but don’t expect us to go to everybody’s doorstep … Delivering small quantities of stuff to homes is not free. Ultimately, somebody’s got to pay for it."
KC's View:
Costco is saying that it is going into the e-commerce business grudgingly, but I suspect the behind-the-scenes activity is a lot more focused than that. These folks are too smart, too aware of how the world is changing, and too cognizant of how cultural changes in how young people shop could affect its long-term sustainability. The same attitude that has them not blaming the weather will have them do what needs to be done to succeed.