Costco has a cult following, but it’s a really big cult that’s welcoming to new members.
Yes, some customers simply like the chain and its low prices. Many, however, hold the brand over other places they shop and truly embrace the “member” relationship.
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For its part, Costco ( (COST) ) does its best to treat members as part of the team and not merely customers. The company isn’t trying to maximize how much money it makes from members.
Instead, it wants to build the relationship, and offering strong value is the cornerstone of that relationship. That’s something CFO Gary Millerchip talks about quite often.
“Our goal is always to be the first to lower prices where we see opportunities to do so and the last to increase prices in the face of rising costs,” he said during the chain’s second-quarter earnings call.
Costco’s relationship with its members has also been built through the company’s food court and Kirkland Signature house brand. Millerchip also shared new information about those popular segments during the call.
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Costco’s $1.50 hot dog and soda deal has been a pillar of its business.
Image source: Patrick T. FALLON / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images
Costco expands Kirkland Signature line
Kirkland Signature is Costco’s sole house brand. It’s used across a wide variety of categories, and in most cases, you are getting a product made by a major name brand at a very low price.
Consumers have a level of trust in Costco’s house brand because they know the chain has committed to keeping standards high. The chain recently improved a product that’s famously expensive and single-use.
“Our merchants also continue to drive innovation with Kirkland Signature. Most notably this quarter, we worked with a new supplier to rework our Kirkland Signature Diapers. Improvements versus the prior offering include a longer and thicker absorbent layer, softer outer cover, and two times more stretch in the waistband, as well as improving the quality of this item,” Millerchip shared. “We were able to increase the value by 11%.”
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In addition to improving its diapers, Costco also made some new additions to the line.
“Other new KS offerings this quarter include KS French Fries, KS Vodka and Soda, and new KS Lager,” he added.
Kirkland and Costco’s food court are key
Millerchip noted the strength of Costco’s house brand during the call.
“Kirkland Signature continues to grow at a faster pace than our business as a whole,” he added.
The warehouse club, he said, also has seen growth in other areas. “Within ancillary businesses, pharmacy and food court departments led the way.”
The CFO was also excited about a new offering in its food court and a returning item.
“In the food court, we have introduced a new strawberry-banana smoothie and are excited to announce the fan favorite turkey provolone sandwich is making a return in Q3,” he shared.
Millerchip also shared some overall color as to what Costco members want right now.
“We believe the member is probably as much focused now on quality, value, and newness as they have been for quite some time. They are still showing that willingness to spend, but they’re being very choiceful where they’re spending their dollars. We think that’s likely to continue and maybe even become more choiceful [with] some return of inflation and the potential impact of tariffs,” he shared.
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Millerchip also sees a small change in consumer behavior.
“I’d say we’re seeing a continued sign of what I mentioned last quarter, where there’s some indication that members are spending a little bit more on food at home versus food away from home,” he added.
