PRICE/COSTCO HAS EXPANSION IN ITS FUTURE
Byline: Robert Spector
BELLEVUE, Wash. — In a retailing sector that’s beyond its boom, Price/Costco is talking expansion.
The warehouse club operator expects to expand its presence in the New York metropolitan area (including Long Island), San Francisco and certain overseas markets.
On Long Island, where Price/Costco has five units, the objective is to double sales, Jim Sinegal, president and chief executive officer, told shareholders at the annual meeting here last month.
He said a 3-year-old Price Club in Westbury, L.I., does $150 million in annual sales and is increasing its volume 15 percent per year.
Jeff Brotman, chairman, added Tuesday that the firm expects to open a warehouse club in Commack, L.I., this year, and is considering several other locations on Long Island and in Queens. He declined to specify how many, though he noted that around Seattle there are 13 warehouse clubs serving a population roughly the same size as Long Island’s, about 3 million.
“The penetration in many of the markets we’re dealing with is not anywhere near complete,” he said.
Brotman said he believes the greater San Franciso Bay area, which has about 13 warehouse clubs and 6 million people, also could support more expansion.
Overall, the company will open about 29 new clubs in fiscal 1995 and 1996, but also expects to close between five and 10 overlapping or underperforming units in each of the two years. Price/Costco was formed by the merger of Costco Wholesale Corp. and Price Co. in 1993, and it still has units near each other.
Additional warehouses in Korea and the United Kingdom will open and the chain will enter Taiwan, bringing the company to a total of 245 warehouses by end of its fiscal year, which concludes in August.
Soft goods, including apparel and jewelry, account for an estimated 10 to 15 percent of the retailer’s $16.2 billion annual sales.
Its largest competitor is Sam’s Club, which has been rumored to be interested in acquiring all or part of Price/Costco. Responding to the report, Sinegal told shareholders, “We have not put out any feelers toward them. We have had no merger conversations going on with anybody.” He conceded, however, that Price/Costco has spoken with Wal-Mart executives on other, unspecified issues.
After two years of declining same-store sales, Price/Costco reported a 1 percent gain in its first quarter, ended Nov. 20. Same-store sales fell 3 percent in both fiscal ’94 and ’93.
Sinegal said holiday and first-quarter results indicate that sales are gaining momentum.
“We came out of the Christmas season very strong,” he said. “We are encouraged by our recent trends, and we think that our comparative warehouse sales will continue to improve.” — Fairchild News Service