Despite a weak economy, Costco.com turns in another strong year

Costco.com has wrapped up another year of strong web sales.

For the 2008 fiscal year, Costco Wholesale Corp. generated web sales of $1.7 billion, an increase of 41.7% from web sales of $1.2 billion in fiscal 2007. In comparison, Costco, No. 18 in the Internet Retailer Top 500 Guide , grew total revenue by 12.6% while comparable warehouse sales rose year-over-year by 8%.

For fiscal 2008, Costco posted net income of $1.28 billion on revenue of $72.5 billion vs. net income of $1.08 billion on revenue of $64.4 billion in the prior year. Overall Costco.com accounted for 2% of total sales and drove 6% of the growth in revenue across all channels. “Internet sales for the whole year came in just shy of $1.7 billion, certainly beating our own budget,” Costco chief financial officer Richard Galanti told stock analysts on Costco’s recent year-end earnings call.

Though Costco didn’t break out specific numbers, Internet sales were softer in the fourth quarter, growing year-over-year by 26% compared with 34% in Q4 of fiscal 2007. “In recent weeks we have seen a slight reduction in the average ticket, but not in frequency of transactions,” Galanti told stock analysts. “Our average ticket is over $400 and big-ticket items have certainly slowed.”

Overall In the fourth quarter ended Aug. 31 Costco posted net income of $397.8 million on revenue of $23 billion, compared with net income of $372.4 million on revenue of $20.5 billion in Q4 of 2007.

Costco members are upscale shoppers. About 74% of Costco.com’s customers are college graduates with annual household income of more than $78,000 and 90% are homeowners. 50% of customers who shop online also are executive members who pay a higher annual fee for perks such as annual rewards and lower prices on services such as check printing, auto financing and long-distance phone service.

Costco ended fiscal 2008 with 7.6 million members and membership fee revenue of $1.5 billion. But Costco’s affluent shoppers are being more economical. “Our members are coming in and being a little bit more disciplined,” Galanti told stock analysts. “They are holding off on buying big-ticket items.”