Costco Wholesale reported quarterly revenue below Wall Street estimates on Thursday, as the U.S. hypermarket chain struggled to attract shoppers in the competitive grocery space.
The membership-only retailer is expanding internationally, opening its first warehouse in China about two months ago, where overcrowding and traffic jams in the neighborhood forced the retailer to limit the number of shoppers in the store.
Costco had record membership sign-ups in Shanghai, partly helped by its social media presence, with over 20,000 registered members, Chief Financial Officer Richard Galanti told analysts on a post-earnings call.
The company said it plans to open its second Shanghai store in 2021.
Costco’s entry into China came amid trade tensions between Beijing and Washington that have burdened U.S. companies with additional tariffs on Chinese imports ranging from footwear, whiskies to televisions.
“We are working with suppliers daily. We’ve gone to pretty much every supplier on every item to see what we can do to both reduce cost and figure out how to do that. In some cases, we’ve reduced our commitments on certain items,” Galanti said.
Shares of the Issaquah, Washington-based company, which have risen more than 40% so far this year, fell nearly 2% in extended trading after missing comparable-store sales estimates for the reported quarter.
Comparable-store sales, or those recorded at Costco’s e-commerce platform and warehouses open for more than a year, rose 5.1%, excluding the impact of fuel and currency fluctuations. Analysts estimated a 5.25% rise, according to IBES data from Refinitiv.
In the United States, comparable store sales, excluding fuel, rose 5.2%, also missing the estimate of 5.32%.
The company’s total revenue rose about 7% to $47.50 billion helped by sales of big-ticket items like diamond rings and Kitchen Aid mixers, but fell short of estimates of $47.57 billion.
Excluding one-time items, the Issaquah, Washington-based company earned $2.69 per share, 15 cents above expectations.