And it's doing it by continuing to be ruthless in keeping prices low, mostly on food. "Others try to make more, we try to make fair," said Costco's CFO Richard Galanti on a conference call Thursday referring to the company's pricing philosophy.
That strategy paid off particularly well in the first quarter as Costco's rock-bottom prices, despite rising food costs, helped it to outperform Sam's Club. Costco's U.S. same-store sales, excluding the impact of lower gas prices and currency swings, increased 5%, while Sam's Club's same-store sales, excluding the impact of lower gas prices, declined 0.5%, reversing a 0.5% increase achieved a year earlier.
Sales in what Costco calls its "food and sundries" category increased by a low to mid-single digit percentage, depending on the category, while at Sam's Club, sales of fresh and frozen food notched a low-single digit percentage gain.
Costco's overall earnings outpaced analyst forecasts by 1 cent although revenue fell short of expectations, largely due to falling gas prices and the strong dollar. The stock was down about 1% in midday trading Thursday.
Wal-Mart, by contrast, missed its first quarter earnings estimates by 2 cents, in large part to lagging performance at Sam's Club. The company's warehouse business, which has more than 600 stores throughout the U.S. and Puerto Rico vs. 474 for Costco, represents about 12% of Wal-Mart's annual sales.