Dive Brief:

• Costco reported that its April sales declined 1.8% over the same period a year ago, to $11.39 billion, while comparable-store sales in the U.S. declined 3.3%. The retailer said mandatory social distancing restrictions, stay-at-home orders and the temporary closures of some of its stores have decreased traffic and sales at its stores. 
• Sales were also impacted by limitations and closures of its travel, food courts, optical, hearing aid and photo departments, as well as lower volume and price deflation in gasoline. 
• Costco's e-commerce sales grew by 88% during April, reflecting a broader shift in consumer buying from bricks to clicks. For the 35 weeks ended May 3, sales were up 7.8%, to $107.64 billion, with comps up 6.7%.

Dive Insight:

Costco's sales hit highlights how shifting consumer behaviors during the pandemic are impacting retailers that rely heavily on store traffic. Customer limits, including metering the number of members allowed inside stores at one time, along with a broader shift to online shopping amid stay-at-home orders delivered Costco's first monthly growth decline in more than a decade, and could signal a tougher road ahead for the company.  

March stock-up buying proved beneficial to Costco, even with social distancing measures in place, with sales up 11.7% to $13.8 billion. But as panic purchasing began to simmer down, so too did basket sizes and foot traffic, which also impacted Costco’s competition including Walmart and Target. 

As stay-at-home orders have spread, online shopping has increased, with grocery e-commerce sales topping $5 billion in April, according to Brick Meets Click. Costco offers same-day as well as two-day delivery of products, but its store pickup offerings are limited to select products.

"Customers like [store pickup], but we don't like it necessarily," CFO Richard Galanti said during the company's second-quarter earnings call in early March. "We're doing buy online and pick up in-store for some small items — small high-value items. But we're not at the point where we're looking for members to buy online and come and pick up their whole grocery baskets."

Costco began limiting the number of shoppers allowed in its stores at one time in March, and has instituted other safety measures including requiring employees to wear masks. Last week, the company announced it will limit the number of shoppers in its warehouse to two people per membership card and require customers to wear face coverings.

The big-box retailer has started limiting meat purchases in response to recent plant closures, which could further impact sales. Limitations on foodservice and service departments have also dinged the company, and will likely continue to be a drag on results for as long as they last.

At the same time, parts of the business are starting to return to normal. Most stores are returning to regular business hours, the company said last week. And stores are reportedly increasing capacity sooner than other retailers. According to Buzzfeed News, Costco employees across the U.S. say stores are upping the number of customers allowed inside to as many as several hundred at one time, likely increasing sales but also worrying store workers.