Costco CFO Says Thanksgiving Website Crash “Did Leave Something on the Table”

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Costco CFO Says Thanksgiving Website Crash “Did Leave Something on the Table”

By Jamie Grill-Goodman - 12/13/2019

Costco Wholesale kept its doors closed Thanksgiving, but then suffered a website crash that Thursday, which led to many customers complaining on Twitter.

Costco's EVP, CFO Richard Galanti spoke about the website issues during the club retailer's first quarter 2020 earnings call, noting “it was unfortunate.”

“Despite all the efforts to have plenty of processing capacity, if you will, there was something that incurred,” he said. “When we look at the five days between Thanksgiving and Cyber Monday, those five days on a year-over-year basis, I mean we still were up in the very high teens as a percentage on e-commerce.”

Galanti told analysts what that indicates is “we could have done better than that.”

“So we did leave something on the table there,” he continued. “And again, we were able to correct it. It took several hours that day, unfortunately. But rest assured, we are spending a lot of money on things like that.”

While Galanti didn’t comment on specific dollars lost, the website was down for at least 16.5 hours, according to data from the outage-tracking website Downdetector, which was shared with Business Insider by the retail aggregate LovetheSales.com. LovetheSales.com worked out that Costco would pull in about $11,035 in e-commerce sales per minute, which means that in this time period, Costco could have possibly missed out on as much as $10.9 million worth of sales. 

Costco’s quarter ended November 24th, before the holidays. It said total and comparable sales were negatively impacted by approximately one-half percent due to Thanksgiving occurring a week later this year, while e-commerce sales in the quarter were negatively impacted by an estimated 12 percentage points. Comparable sales for the quarter in the U.S. on a reported basis was 4.7%, ex-gas deflation was 5.0%.

Diluted earnings came in at $1.90 per share, up 9.8% from the same period last year and just ahead of the The Street consensus forecast. Group revenues, however, missed analysts' estimates, The Street said, despite rising 5.6% to $34.24 billion. Online sales were a major factor in the broader revenue miss, with digital sales rising on 5.7% from last year, compared to gains of 22% and 26.2% over the previous two quarters. 

Costco noted during the call that earlier this week it launched its Japan e-commerce site with its Australia site planned to open in the first half of calendar 2020.

The club retailer is also teaming up with Instacart to test one-hour free delivery of prescription drugs to its members. The pilot program is limited to California and Washington state, but allows members in those states to have their prescriptions sent out free in an hour if they spend at least $35. 

“We already have a good and growing mail-order business,” commented Galanti. “We have 540-ish pharmacies around the country. But this is another opportunity.”

“It is something to add to the competitive belt here,” he continued, but also noted it's brand new and just in a few locations. However, Costco will be rolling out to a few more locations shortly.

“So we will see where it goes,” he said.