Spending

Costco to open new stores, continue senior shopping hours indefinitely

With coronavirus cases rising, Costco is expected to open five new locations by fall, along with two delivery centers. Here's why experts say Costco is expanding.

Twenty/20

Some Costco members have said their membership is even more valuable now than it was before the pandemic. Shoppers with a similar mindset who want to save money by buying groceries in bulk and limiting their supermarket trips will soon have more opportunities to do so. 

Costco recently announced it plans to open five new locations by the end of September, along with two delivery centers in Ontario and San Jose, California. Stores are slated to open before September 30 in five cities: 

  • Bismark, North Dakota
  • Cherry Hill, New Jersey
  • Idaho Falls, Idaho
  • Saratoga Springs, Utah 
  • Surprise, Arizona

The expansion comes as many states, including Arizona and California, are experiencing an uptick in coronavirus cases, and some areas are walking back orders to reopen indoor dining and other high-risk activities. Costco is currently offering a limited, takeout-only menu at its cafes.

The chain has also decided to extend senior shopping hours indefinitely. This means that, for the forseeable future, the hour between 9 a.m. and 10 a.m. will be a reserved for those "ages 60 and older, and for those with disabilities or who are immunocompromised," according to the store's website

Consumer spending habits have changed 

Even though sales are less than what they were last year, Costco's net income was $838 million during the fiscal third quarter, according to CNBC. This isn't surprising, says Karan Girotra, a professor of operations, technology and information management at Cornell University. 

"As more people stay at home, spending has shifted from restaurants and travel to groceries and home improvement," Girotra says. 

Because of its size, Costco was able to absorb the cost of implementing Covid-19 precautions, such as purchase limits and capacity limits that reduced sales. In the third quarter, the warehouse spent $283 billion on Covid-related costs, according to CNBC

As more people stay at home, spending has shifted from restaurants and travel to groceries and home improvement.
Karan Girotra
professor of operations, technology and information management at Cornell University

"The biggest players — Amazon, Walmart, Costco — were and continue to be most successful in keeping their shelves stocked, instituting new measures in stores, staffing up, and dealing with suppliers," Girotra says. "Scale helps in dealing with disruptions and redesign." 

Costco also stocks fewer items than their competitors, according to a Morning Star analysis: While Target typically has between 75,000 and 80,000 items in stock, and Walmart has approximately 140,000, Costco only stocks 3,700 items. For consumers, this means that Costco might be able to keep more shelves full, even if coronavirus cases rise again and people start stockpiling groceries. 

Costco is thinking long term 

Many of these new Costco locations were probably already being built when coronanvirus restrictions tightened this spring, says Zain Akbari, an equity analyst at Morningstar. 

"The cost to delay [openings] can often be far higher than just opening the stores and proceeding," Akbari says. 

Plus, Costco is shutting down some locations, as well. One of the new locations in Surprise, Arizona, is a 40-minute drive from a Costco in Phoenix, Arizona, that is closing this fall. 

Costco generally thinks two or three years ahead, says Jeff Green, a retail real estate consultant. So in the long run, coronavirus is more of a blip on its radar rather than a course-altering event. 

"They are looking at what they did pre-Covid, not during Covid," Green says. "They are taking the long-range view that this will get better, and when it does they will be back to full strength." 

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