Costco Seeing Slow Private Label Gains, CFO Tells Analysts
Sales of private label items at Costco Wholesale Corp. are on “the evolutionary path right now,” which means there was no major jump in private label penetration rates in the company’s most recent quarter ended Nov. 20, Richard Galanti, Costco’s chief financial office and executive vice president, told analysts in a recent earnings conference call.
Costco’s private label penetration rate is in the low 20 percent range, he says. The company’s goal is to raise that to the low 30-percent range but that could take between four and nine years to achieve, he estimates. PLBuyer’s Top 35 ranking lists Costco as the fourth largest seller of private label food and grocery items in North American with a penetration rate of 24 percent in 2010.
After the financial crisis of late 2008 and into early 2009, Costco saw private label penetration jump 3 percent, a change Galanti termed as revolutionary. Costco’s more usual path for private label sales is to see gains of half to a percent a year, he explains.
Issaquah, Wash.-based Costco on Dec. 8 reported quarterly earnings of $320 million compared with $312 million in the same quarter the prior year. Sales hit $21.18 billion compared with $18.82 billion in the same period last year. While net income rose, it did not meet financial analysts’ expectations for the quarter and Costco stock fell following its earnings announcement.