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Costco Cites Home As Strong Area

Costco Wholesale Corp. cited home furnishing as contributing to a successful second quarter during its conference call last week. (see related story on page 19)

Richard Galanti, executive vice president and chief financial officer of Costco Wholesale Corporation, said he was optimistic about the possibilities for strong sales offered by the company's second Costco Home venture, this one located in Tempe, Ariz., because it stands in close proximity to an established Costco.

“The exciting thing about this one versus the existing one here is that it is located next to a regular Costco that gets 5,000 to 6,000 visitors a day. So, right next door, you have the potential for cross-over, and we like what we see,” Galanti said.

Optimism, however, doesn't mean that Costco Home units will be popping up all over the country this year. “We might open up another one or two in the near future, but that's it,” he said.

As for traditional Costco clubs, the company said it has opened a total of 13 locations since the beginning of the fiscal year on Aug. 30 — seven in the United States (including one relocation and the Tempe Costco Home), three in Canada (including two relocations), one in Japan (the company's fifth there), one in Taiwan (Costco's fourth) and one in Mexico.

For the second half of the year, Galanti predicted 14 to 16 openings, including two or three relocations, resulting in approximately 19 to 21 openings for the year.

“Given the basis of 417 locations that we began the year with that would be a 5 percent unit growth and a 6 percent square footage growth.”

Within softlines strength in home furnishings, Galanti said Costco saw good numbers in domestics and women's apparel. Geographic areas of success were Texas, the Southeast and the Midwest. He added that the company has seen strong numbers internationally in Japan, Taiwan and South Korea.

In terms of where new Costco clubs could emerge, Galanti said malls are a possibility, but not usually the company's first choice. He said that there are three Costco locations in mall areas, while only one in Virginia is attached to the larger mall structure.

In scouting out Costco locations, “Our first priority is to find a 12- to 15-acre site with ample parking on the same level as the building. Our second choice is a site where the parking is on a different level at which customers can take oversized elevators to their cars. Our third choice is something like we have in Port Chester, N.Y., where you have the retail floor split between two levels,” he said.

“We are looking at everything. Sometimes, from an operations standpoint, it is cheaper to tear down something rather than trying to figure out how to put our concept into a building. Certainly, we are all trying to be more creative in how we look at these things,” added Galanti.

As for international expansion, Galanti said the company is looking at Europe but, “China is not on our plate for the next year.”

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