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KEY POINTS

  • Costco’s same-store sales growth of 8.6% in October was above the 8.4% growth reported in September and was well ahead of consensus.
  • Costco continues to post strong performance in domestic and international segments.
  • Specialty retailer Buckle’s year-on-year sales fell 1% in October 2018, although at a much lower rate than the 2.4% decline in September 2018. 
  • L Brands posted healthy comparable sales growth boosted by Bath & Body Works.
  • Cato’s comps fell marginally.

Costco’s October Comps Beats Expectations: E-Commerce Continues to Shine 

  • Costco’s October same-store sales grew 8.6% year over year, beating analyst consensus estimate of 7.7% and was higher than the 8.4% growth reported in September 2018.
  • Costco’s e-commerce comparable sales growth rate slowed to 20.0% in October compared to September’s 28.6% growth rate.
  • In October, global Costco traffic climbed 4.6%, while domestic traffic increased 4.8%.
  • The warehouse discount store witnessed strongest results in the American Midwest, Northeast, Los Angeles and San Diego.
  • Internationally, Costco saw strong sales growth in Spain, Japan, Australia and Mexico.
  • Foreign currency fluctuations impacted the US dollar value of October comp sales.
  • Revenues from operations in Canada lost a little more than 325 basis points.
  • Other international operations lost a little less than 200 basis points.
  • Foreign exchange fluctuations shaved approximately 75 basis points off total company results.
  • Cannibalization negatively impacted US sales by about 50 basis points, sales in Canada by slightly less than 75 basis points and other international segments by slightly less than 100 basis points.
  • Beginning fiscal 2019, which runs September 3, 2018 through September 2, 2019, the company adopted revenue recognition standard ASC 606, and this new revenue recognition benefited sales by approximately 80 basis points in the US and about 65 basis points for total company.
  • Food and sundries same-store sales grew by mid-single digits. Departments that witnessed strongest comp growth were tobacco, sundries and candy. Hardlines were up by high single digits. The better-performing departments included tires, automotive and majors.
  • Softline comps increased by high single digits. Departments that performed well included apparel, small appliances and special-order kiosks. Fresh foods were up by mid-single digits with all departments showing similar performance.
  • In the ancillary business segment, gasoline, hearing aids and optical saw the strongest comp sales increases during the month. Higher gas prices added slightly more than 200 basis points to Costco’s total reported comp sales. The average selling price of gasoline per gallon was up 19%, to $3.08, compared with $2.58 last year.

L Brands Reports Modest Comp Growth Aided by Strong Performance from Bath & Body Works, Offset by Flat Performance by Victoria’s Secret

  • L Brands reported comparable sales growth of 4% in October, slower than the 5% growth posted the previous month. Victoria’s Secret’s same-store sales were flat, while comps at Bath & Body Works climbed 11%. Victoria’s Secret reported September comparable sales growth of 1% while Bath & Body Works reported comparable sales growth of 13%.
  • L Brands’ merchandise margin rate was down significantly in October compared to last year, due to increased promotional activity at Victoria’s Secret.
  • Inventories per square foot as of the end of October grew 10% year over year.
  • Victoria’s Secret’s comps were flat due to performance by lingerie, PINK and beauty. The company plans to continue its newest Christmas floorset, launched in the last week of October, featuring fashion and seasonal newness in the core businesses of body care, home fragrance, soaps and sanitizers.
  • Bath & Body Works’ comp growth was driven by strong product acceptance. The brand’s merchandise margin for the month was up compared to last year, driven by lower promotional activity.

Buckle Posted Negative Sales Growth Due to Poor Performance in the Women’s Segment

  • Buckle’s comparable sales fell 1.0% year over year in October, compared to a 2.4% decline reported in September 2018. Net sales declined 2.4% year over year.
  • Total sales in the men’s business fell 1.0% year over year. The men’s segment accounted for 50.5% of total sales compared with 49% in September. Price points were down 3.5% for October in the men’s segment.
  • Total sales for the women’s segment fell 6.5% year over year. The women’s segment accounted for 49.5% of total monthly sales versus a slightly higher 51% share in September. Price points were down about 2.5% in the women’s business.
  • Accessory sales fell 11.0% year over year in October and accounted for 7.5% of total sales. Footwear sales grew 9% year over year and represented 7.5% of total sales. The average accessory price points were down 6.0% and the average footwear price points were up 5.0%.
  • In the current month, units per transaction grew 2.5% and the average transaction value fell about 1.0%, year over year.

Cato Reports Marginal Decline in Net Sales and Comps

  • Cato’s sales fell marginally by 0.3% to $62.1 million; comparable sales fell 1% year over year in October, the same rate as September 2018.
  • As of November 3, 2018, the company operated 1,350 stores in 33 states, down from 1,370 in the year-ago period. Cato did not add or close any of its stores in the current month.

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