Costco is emerging as a major force in Australian retail as annual sales hit $3.6bn

The US giant, known for selling everything from coffins to sushi platters, is emerging as a major force in Australian retail as its sales eclipse Myer, David Jones and Officeworks.

Costco, the US warehouse-style retailer known for selling everything from diamond rings and coffins to sushi platters and cognac, is emerging as a major force in Australian retail that has accelerated since the end of pandemic restrictions to push its annual sales to more than $3.67bn.

The chain, which only has 16 stores in Australia and one in New Zealand, is planning to roll out more stores in coming years to take advantage of its rising popularity among shoppers, and has taken out a $150m lending facility to bankroll its ambitious growth agenda.

Latest results lodged with the corporate regulator have revealed Costco is quickly becoming a key player in the food, grocery and merchandise retailing sector as it continues to peel away sales from traditional players such as Woolworths, Coles, Target, Big W and Kmart.

For the 52 weeks to the end of August, Costco Wholesale Australia posted sales of $3.67bn, up 30 per cent from total sales of $2.82bn last year. While some of the uplift in revenue was bolstered by rising prices due to inflation, especially petrol, which is sold at some Costco outlets, the bulk of the revenue gain was from its army of shoppers scooping up products from across categories such as food, grocery, clothing, hardware, homewares, consumer electronics and furniture.

Costco, which has an annual membership fee that allows people to purchase goods at its stores, has grabbed a large stake in the Australian retail sector since it opened its maiden store in Melbourne in 2009. Since that first store, it has rung up cumulative sales of almost $20bn, up sixfold since 2013, and it is believed it has more than 150,000 paid up members across Australia.

Costco’s local boss Patrick Noone at its Lidcombe store in western Sydney.

While Costco Australia’s latest annual sales figure of $3.67bn is small compared to leading retailer Woolworths’ Australian supermarket sales of $45.46bn it has almost eclipsed the revenues of other well-known general retailers such as Big W, $4.43bn in sales, and is now bigger than Officeworks, Myer and David Jones which have annual sales of between $2bn to $3.2bn.

Costco posted a profit of $57.3m for 2022.

However, 2022 was tough for Costco as the impact of lockdowns and restrictions on movements kept many of its member shoppers away from its big-box stores. Costco's stores are often situated on industrial estates and in Victoria, especially with rules around limits to travel, distances kept Costco members blocked from shopping at its stores.

The end of Covid-19 restrictions has triggered a shopping boom at Costco.

Costco Australia boss Patrick Noone says the US retailer can thrive in a strong or weak economy, as it sells everything from diamonds and champagne to cheap food and groceries.

This as well as households looking to make savings to their budgets as cost of living expenses rose helped bring in shoppers, said Costco Australia boss Patrick Noone.

“Some of the bounce back was from Covid last year when we had lockdowns. Some of it is members tightening their belts, and now they are looking for great value, and we’ve always had great though.

“And I think we have also got a new warehouse in other suburbs, which helps a lot.”

He said the food category had gone very well for Costco.

“I think the economy for us is growing, and we are an attractive offer for our members, and they keep on coming back, and more often.

“And we are a business where people can save a lot of money so when times are tough in the world and the wallet is a bit tight Costco is a great place to save money, but at the same time when things are going well we have all those other goods like diamonds and champagne. So we tend to thrive, to some at extent, at both ends.”

Costco currently has 16 stores in Australia, after opening its second warehouse in Perth and opening a store in Auckland, New Zealand. It is opening a store in the Gold Coast in June and Mr Noone said it has ambitions to open more stores in parts of Sydney, Melbourne, Perth and New Zealand.

“We are working on other locations around the country, and we will definitely get more in the Sydney market. We are looking perhaps for another one in the Perth market, and in New Zealand we can see opportunity for a couple more there as well.

“We are still looking for one in the Geelong (regional Victoria) area as well as south-east of Melbourne in suburbs such as Pakenham, Officer, which are very attractive areas for us.”

Costco charges $60 for annual membership for individual use and $55 per year for business and enterprise use.

The ASIC accounts lodged by Costco Wholesale Australia show a new lending facility of $150m which will help build new stores, with Costco now big enough in Australia to secure its own funding rather than rely on a constant stream of funds from its US parent.

Originally published as Costco is emerging as a major force in Australian retail as annual sales hit $3.6bn