Costco warehouses have gotten a lot busier in recent years, and the company has noticed.
CEO Ron Vachris said in the company’s fourth quarter earnings call Thursday that “the right opportunities have come” for locations that allow the company to reach new markets and increase warehouse capacity in areas where it already operates.
Vachris said on the call that Costco plans to open 35 locations this fiscal year, compared with 27 in the past year. Prior years have typically fluctuated between 25 and 30 openings, which would make this year a comparatively busy one.
The first four locations of this phase include Fruitport, Michigan; Mechanicsburg, Pennsylvania; Indian Land, South Carolina; and a business center in Mississauga, Ontario. All four are slated to open in October. The company does not disclose details of future sites until 90 days before the scheduled opening date.
Costco executives have previously described how the company is placing new warehouses near successful ones to strategically cannibalize sales and relieve traffic pressure on popular locations.
“In the US, where we open and we’re filling in markets, we see tremendously quick growth in sales,” Millerchip said. “Not only in the new warehouses, but we replace the sales in the affected warehouses because we’re freeing up the capacity for those members to shop more frequently.”
And this year’s 35 openings are expected to include five relocations of existing clubs.
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“The average warehouse now in the US and some of our more mature markets is around 20 years old,” CFO Gary Millerchip said, adding that relocations present “an opportunity for us to refresh and to support continued best-in-class service in those warehouses.”
As for what happens to an old warehouse when the operation moves to a larger space, Vachris said those buildings make good candidates for future Costco Business Centers that serve larger-volume customers.
“They have the right size and parking is not an issue at that level, because we deliver about 60% of the goods from our trucks out there as well,” Vachris said.
New locations also present an opportunity for workers who want to start or grow their career with the wholesale club, which is one of the better-paying employers in retail.
