Costco shoppers are still cutting back on big-ticket items even as inflation cools, execs said at the company's earnings call Tuesday.
The average value of each transaction at the wholesaler was down 4.5% year-over-year in the US, which CFO Richard Galanti said was "impacted in large part from weakness in bigger ticket non-foods discretionary items."
In the previous quarter, the average ticket size had been down 3.5% compared to the same period in 2022.
"It makes sense to us on big-ticket discretionary that's where you'd see the biggest weakness," Galanti told investors. The number of US transactions, however, had increased, he said.
Online sales of items in the major big-ticket discretionary categories which make up more than half of Costco's e-commerce revenues — home furnishings, small electrics, jewelry, and hardware — were down 5% year-over-year in the quarter, Galanti said, without giving further details of which items had seen the biggest drop in sales.
This is a massive improvement on the 20% year-over-year drop in online sales in these categories that Costco had posted the previous quarter. During that quarter, these items made up 55% of e-commerce sales but just 8% of in-warehouse sales, Galanti said during its earnings call in May.
Galanti said that sales of gaming products, tablets, and some Apple products were up, while appliance sales online had risen 30% year-over-year. Audio product sales were up "a little" and TV sales were up but the average price point had come down, he said.
Notebook and computer sales hadn't risen, but Galanti didn't say whether they were flat or had fallen.
Customers aren't necessarily as receptive to discounts as they used to be. Galanti said that when Costco puts temporary price discounts on items, sales do increase, "but it's not as predictable I would say as it used to be."
Galanti said that inflation for fresh food and sundries was "flat-to-down a little" while for some consumer-packaged goods and sundries it was "up a little."
The cost of food products for at-home consumption rose just 3% in the year to August, according to the consumer price index, the Bureau of Labor Statistics' measure of consumer inflation. From July to August, the average price of some items including tomatoes, eggs, cheese, rice, cereal, and bread declined, the data shows.
Galanti told investors that Costco wasn't raising membership fees for the time being. The retailer made 1.9% of its revenue in the year through September 3 through membership fees, but this accounted for the majority of its profit.
Overall Costco posted a 6.7% year-over-year jump in global net annual sales to $237.7 billion, alongside $1.5 billion in membership fees. Net income rose 7.7% to $6.3 billion.
