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Most companies want to have loyalty Costco (NASDAQ: COST) has won from its members. The warehouse club succeeds because when people join, they remain members. This immunizes society against any change in the retail landscape.
But Costco is not resting on its laurels. The company has evolved in recent years to embrace digital and delivery. However, he was able to do it slowly, taking the time to see what worked, as it remains essentially a club to which people adhere to save money.
Costco has steadily increased its membership. Source of the image: Costco.
Business is solid
Although turnover and sales per store are not the most important indicators of Costco, the chain is well behaved in both areas. The chain posted a net profit of $ 889 million, or $ 2.01 per share in the second quarter, an increase of 27% over the same quarter of the previous year. In addition, the company recorded a 7.3% increase in net sales and saw same store sales increase 7.4% in the United States.
The most important figures for Costco, however, are its renewal rates and the number of new members it adds. And these numbers continue to be stellar.
"In terms of renewal rates in the second quarter, the renewal rates of our US and Canadian members in the second quarter reached 90.7%, compared to 90.5% 12 weeks earlier in the first quarter," said the chief financial officer. Richard Galanti at the call of the second quarter results. "And, worldwide, the rate has risen to 88.3 percent from 88 percent at the end of the first quarter, so we've improved our renewal rates."
These numbers are stellar and, according to the numbers, the company has consistently delivered quarter after quarter, year after year. They show that the company has a loyal customer base that has not left even as digital options for low-cost purchases have increased. Costco has not only done a good job retaining his clients, he has also added to his membership base.
"In terms of the number of members at the end of the second quarter, of member households and cardholders in total, we ended the quarter with 12.2 weeks earlier, with 52.2 million member households. they were 52.7 million, "said Galanti. "And the total number of cardholders went from 95.4 million at the end of the first quarter to 96.3 million, 12 weeks later at the end of the second quarter."
Costco also continued to develop its more expensive executive member base on a regular basis. This category closed the second quarter at about 20 million, an increase of 341,000 since the end of the first quarter.
It's a question of loyalty
Costco customers love the company's core value proposition. They showed that they would remain loyal to the chain even though other choices could offer similar value and more convenience. The warehouse club has even been able to increase its membership rates (albeit modestly) in June 2017 without seeing a drop in the number of its members.
Costco's business is not particularly exciting. It's a company that takes a slow and steady approach, with a laser focus on keeping its prices low and its interesting commodity mix. This approach works: the company continues to develop its business and there is no reason to believe that this will not continue in the foreseeable future.
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