Despite the inflationary environment, Costco said its customers are not trading down but are trading up or certainly trading the same level as before. Sales for its Kirkland Signature private label maintain a steady growth, gaining 1% penetration year-on-year and now accounting for 28% of total sales. Not only is this a key part of the Costco value proposition, but an important differentiator and traffic driver.
In a conference call announcing the company’s earnings, Richard Galanti, Costco’s CFO, spoke about how consumers are turning to store brands.
“Many of you have asked about private label with the recent inflationary environment and what is happening, are people trading down? And of course, our first response is they’re not trading down. They’re trading up or certainly trading the same,” he said.
Galanti added “In terms of Kirkland Signature merchandise penetration and excluding gas and other businesses that carry the Kirkland name, Kirkland Signature merchandise is up just under 1% in terms of penetration compared to a year ago. Our KS merchandise penetration is about 28% for the year. This is similar to historical trends, where it’s increasing slowly and steadily over time.”
Overall results during the 16-week quarter which ended Aug. 28, Costco’s net sales hit $70.76 billion, an increase of 17.5% from $61.44 billion a year earlier. Another highlight for Costco was their growing strength in grocery sales. The company reported grocery sales, including third-party delivery, two-day dry, fresh, and frozen products, were up 20% in the latest quarter.