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Costco's Upped Expansion Another Sign of Retailer Confidence

Costco Wholesale Corp. (COST)'s increased its expansion plans over the next few years, showing that the retailer isn't concerned that the recession and pullback in consumer spending will last forever. And the Issaquah, Wash.-based discount club isn't the only major chain as of late to announce ambitious growth plans after many chains pulled back new-store growth when the economy went sour.

In the case of Costco, it is upping its number of new units from 16 to 18 in its current fiscal year, during which the first quarter just ended. The next fiscal years will increase that to the low 20s and the high 20s in years beyond.

Costco is even still bullish on Manhattan, the country's most expensive retail market, where the company recently opened its first store. "If there were two more sites in Manhattan and other parts would we do it?" asked Richard Galanti, chief financial officer, during the first-quarter conference call. "I think we'd do it in a second."

Costco is undertaking this increase in stores when sales at its 413 U.S. locations aren't as good as they were in the past. Same-store sales rose only one percent year over year during its first quarter, while net sales rose six percent. For all of the previous fiscal year, sales at stores open at least a year were down two percent.

Costco isn't alone in its decision to add more stores. Staples (SPLS) also isn't shy, with plans to open 50 stores this year and in 2010. Best Buy (BBY) operated about 130 stores more at the end of its second quarter than it had during the same year-ago period. And deep discounters like Dollar General are opening their doors at a rapid rate.

Granted, a lot of chains might be taking advantage of rent breaks by landlords or that fact that a few large players closed in the last year. But outfits with a consistent track record of success like Costco and Best Buy probably aren't hasty in their long-term planning.

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