Costco names Australia as growth target but securing sites and planning approvals could slow growth

The chief financial officer of international retail giant Costco says the Asian region is a primary growth target for the company, and says he hopes Costco could open “five or six” stores over the next three years in Australia.

But Costco Australia managing director Patrick Noone has warned the rapid expansion of Costco’s Australian operations, which is currently limited to just one store in Melbourne, might be slowed by problems getting the right sites for new stores.

Costco CFO Richard Galanti said on a recent conference call to announce the company’s second quarter results (net profit increased 12.5% to $US565 million for the six months to February 14) that the retail giant was hoping to lift its rate of new store openings from the current level of 16 to the “low 20s” in 2011 and 2012 and the “high 20s” in 2013 and 2014.

An important plank of this expansion will be the company’s overseas operations, particularly in the growing Asian market.

“We are ramping up some of our international [expansion] a little bit. Our success in Asia is an example” Galanti said.

“Ramping up doesn’t mean we are going to one to 10 in Australia in two years. It means that instead of doing three in three years, we will hopefully do five or six.”

But the growth target may be optimistic. Noone said Costco Australia is keen to expand but it is not an easy process.

“It has to be done based on what available in terms of sites and planning approvals. There are sites out there but it’s the planning controls we need to deal with.”

Noone is currently trying to secure approval from the NSW Government for the company’s first Sydney store, to be located in the suburb of Auburn, near Parramatta.

Noone says the company recently supplied the Government with additional information to support its planning submission.

“We’re basically waiting on them.”

He said construction of a new store would take at least 12 months, meaning the Sydney store remains some way off.

Noone says the Melbourne store, which opened last August in the Docklands precinct, is performing well.

“Business in Melbourne is very good and we’re very happy with where we are.”