COVID Lockdowns in Shanghai Dealt Costco $35M Sales Hit

Costco is carrying “a few hundred million dollars'” worth of extra inventory in “late-arriving” holiday merchandise, which it will store until the fall “to ensure proper inventory levels in the face of these ongoing supply chain issues,” said Bob Nelson, senior vice president-finance and investor relations, on a quarterly earnings call Thursday for its fiscal Q3 ended May 8. “The additional inventory we're carrying is in the right departments,” and the Costco supply chain team feels good “about our ability to move it,” he said. Costco’s first warehouse club in China, located in Minhang, Shanghai, was closed for the last six weeks of the third quarter due to Beijing’s COVID-19 lockdowns, costing the company about $35 million in sales, said Nelson. The Minhang location reopened May 18, but it’s operating “under restrictions on the number of people that can be in the building at one time,” among other limitations, he said. Costco’s second building in Suzhou, which opened in December, “has largely avoided the lockdowns and restrictions to this point,” he said. The company’s currently targeting a December opening date for its third Shanghai building in Pudong, but the timing “will somewhat depend on the area remaining open for the next several months and not being more negatively impacted by lockdowns,” he said. Costco has four additional China buildings planned for the next two years, he said: “These would be our first China openings outside of Shanghai.”