Costco Stores Are Getting Bigger

Plans are underway for a new Costco Warehouse store in Fresno, California to open a 241,000 square foot store with 32 gas pumps. The store’s footprint would be about 22.5 Acres. There will also be an automatic car wash and plenty of space for receiving merchandise, storing merchandise and a market delivery option.

As of today, Costco has about 857 stores. Store sizes run from a small 80,000 unit to 230,000 square feet unit. The average size of Costco warehouse stores is about 146,000 square feet. Costco is replacing a 134,000 square foot store in Fresno.

The Fresno Bee reports that a lot of Fresno residents have expressed concern that the large Costco warehouse would generate a lot of traffic on streets neighboring the store. Costco wants to construct a private drive which has been labeled for community commercial use. However, the newspaper suggests that traffic counts could change the site to general commercial use.

In fiscal 2022 Costco reported sales of $222.7 billion. The company has steadily increased sales. In the first quarter sales increased 8.1%, in the second quarter sales increased 6.5% and in the third quarter sales increased 1.9%. It is likely the company’s fourth quarter will have an increase of about 2%. Many of the early stores of Costco must be increased in size to be able to satisfy customer demand.

While management was concerned about slowing sales, it did point out that there was no LIFO charge in the third quarter while in 2022 the LIFO charge was $223 Million. With the current reduction of food prices, it is likely that there will again be no LIFO charge in the fourth quarter of 2023.

POSTSCRIPT: Costco is a leader in the grocery business. With a tightly controlled inventory assortment it is likely that the company will show sales growth. Sales and earnings for the 4^th quarter and full year 2023 will be reported on September 26, 2023. The Fresno opening may be the beginning of an effort to enlarge older stores that are busting at the seams. Larger stores are likely to show better sales.