Supermarket Giant Costco Blames 'Cannibalisation' For Weak Australian Performance

Shopping in Costco. Photo: Getty Images.

Costco Wholesale has revealed to its US investors that weak sales growth in Australia is a result of new stores taking sales away from established outlets.

Costco chief financial officer Richard Galanti said sales growth during the fourth quarter of last financial year was weaker in Australia than its overall global performance, Fairfax Media reported.

“Internationally, within the plus-8 per cent local currency comp, Australia and Japan were the weakest, due in large part to cannibalisation,” Galanti said.

In May 2014 Costco opened a new store at North Lakes in Brisbane, while in November 2013 it opened stores at Ringwood in eastern Melbourne and Casula in western Sydney.

Costco launched its first Australian store in Docklands, Melbourne during August 2009 and the supermarket retailer then opened a second store in July 2011 at Auburn and a third in Canberra during the same month.

The cannibalisation theory suggests the Ringwood store now competes with Docklands, while the Casula store may be luring shoppers from the Auburn store.

Costco posted a 13 per cent increase in fourth quarter earnings, with same-store sales rising more than 8 per cent after currency movements and total sales up 9 per cent to $US35 billion.

Annual sales jumped 7 per cent to $US110.2 billion, while full year profits increased 1 per cent year-on-year, reaching $US2.06 billion.

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