Costco Wholesale Corp. has chosen to lighten its holiday product line this year as more customers focus on essentials and limit discretionary spending.
Costco chief executive Ron Vachris said the company had to rethink how it stocks shelves for the holiday season amid economic uncertainty around the world.
“Our buyers, when we were booking for this holiday season, really had to evaluate all the discretionary items — the toys and the trim and the decorations and those sorts of things,” he said during the retailer’s fourth-quarter earnings call. “We really thinned down that whole category and we thinned down a lot of the traditionally seasonal areas as well.”
Chief financial officer Gary Millerchip said shoppers “remain very choiceful in their spending on discretionary items.”
“There are no better examples of this than our hot dog combo, rotisserie chicken, and (Kirkland Signature) bath tissue,” he added.
Canadian core retail sales slowed for the third consecutive month in July, according to data from Royal Bank of Canada cardholders , though consumers showed the most restraint on essential spending, particularly gas station sales.
Costco’s product changes have opened shelf space to some items that wouldn’t normally find a spot during the holidays, namely “high-ticket goods” such as furniture, saunas and backyard sheds, Vachris said.
“I still see it as a very exciting holiday season, with some new goods that we haven’t carried in prior years,” he said.
Costco said same-store sales grew 6.4 per cent in the fourth quarter , surpassing the 6.2 per cent analysts expected. Canadian same-store sales, meanwhile, were a bright spot in the quarter, climbing 8.3 per cent. Annual revenue for Costco’s fiscal year hit US$275 billion, amounting to adjusted earnings of US$18.21 per share.
To mitigate the impact of tariffs on its business, Costco is looking to source more of its Kirkland Signature items from within the countries in which they will be sold.
“This is helping to lower costs and reduce emissions from transporting goods around the world,” Vachris said.
Overall, Millerchip said he’s happy with how the company has mitigated tariff impacts without passing much of the added costs to consumers.
“We largely feel like we worked through the strategies that we needed to mitigate what we see in front of us today,” he said.
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