Even before the pandemic, Costco (COST) – the warehouse giant – seemed to be getting most of the things right. At present, it operates nearly 800 warehouses across 12 countries where it boasts of more than 100 million paid members.
The current pandemic just made Costco’s business proposition even more stronger, along with the likes of Walmart and Target.
Benefits of Being an Essential Retailer During the Pandemic
Costco leveraged its status as an essential retailer during the peak COVID-19 pandemic to meet growing consumer demand for fresh produce, appliances and gardening supplies. It’s evident from its monthly comparable store sales performance, which have been registering double-digit growth over the last few months.
Changing consumer behavior worked in Costco’s favor. For instance, the burgeoning preference for private label consumer goods was evident from Costco’s private label business. With less than a tenth of Walmart stores, Costco stores managed to bring in close to $40 billion in revenue through their private label brand, Kirkland Signature. This surpasess Great Value’s (Walmart’s private label brand) contribution of roughly $27 billion to Walmart’s overall revenues.
In 2020 (fiscal year ending August 30), Costco unsurprisingly reported significant business from its e-commerce platform. Membership renewal rate remained steady at around 90%. The company was also able to increase membership fee by well over $50 million during Q4 2020 compared to Q4 2019. On a year-over-year basis, diluted EPS improved by 9.2% to $9.02 per share in 2020 on the back of a 9.3% increase in net sales to over $160 billion.
So, it was not surprising why Coctco would declare a special cash dividend of $10 per share payable to shareholders of record as of December 2.
Looking forward, Costco remains ambitious in terms of opening new stores. After a net addition of 13 locations for fiscal 2020, the company intends to raise that figure to nearly 20 for 2021. Strengthening e-commerce business will also remain a major area of focus, given the traction this segment has gained during the pandemic.
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