What retail apocalypse? As big-box operators have closed stores, Costco has bucked the trend, increasing sales 8% in its past fiscal year to nearly $150 billion and opening 25 new locations. Among the new outlets: its first in China, whose opening resulted in crazy crowds. (The store also ties the record for being home to the company’s largest parking lot.) Under the watch of CEO W. Craig Jelinek, Costco increased comp sales—an important industry metric—by 6% in its last fiscal year as it upped shopper frequency and the amount they spend each visit.
Costco’s success can in large part be credited to its warehouse club model and powerful private-label Kirkland brand. Customers pay an annual membership fee, the company’s biggest source of profit, which lets Costco charge less for a curated assortment of goods. Costco has attracted higher-income customers, who will even buy six-digit diamond rings from the retailer and are hooked on the formula; membership renewal rates are greater than 90% in the U.S. and Canada. Despite the company’s successful store model, Jelinek continues to invest in e-commerce and technology. Costco has a partnership with Instacart and is testing ways to move customers through its stores faster.
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