Last month, Costco Wholesale (COST -1.64%) reported stellar results for the final quarter of its 2021 fiscal year. Indeed, fiscal 2021 was one of the most impressive years in Costco's impressive history. Adjusted comparable sales jumped 13.4% and earnings per share reached a record $11.27.

Costco has gotten off to a good start in fiscal 2022, as well. Last week, the leading warehouse club chain reported excellent sales results for the retail month of September.

Another strong month

During the five-week period ending on Oct. 3, Costco generated net sales of $19.5 billion: up 15.8% year over year. Comparable sales grew 14.3%. Excluding the impact of soaring gasoline prices and the weaker U.S. dollar, adjusted comparable sales increased 9.4% compared to September 2020.

A 9.4% comp sales gain would be impressive under any circumstances. Making it even more remarkable, Costco faced a tough comparison after posting a 16.9% comp sales increase in the prior-year period. Moreover, supply chain constraints have held back sales for many retailers in recent months. This highlights how the retail giant is capitalizing on its scale to keep an adequate volume of merchandise flowing to its warehouses and building upon the sizable market share gains it achieved during the peak of the pandemic.

Broad-based sales gains

Continuing recent trends, rising traffic drove most of Costco's sales growth last month, as consumers have become more comfortable shopping in stores this year. Comparable traffic rose 7.2%, including a 7.4% increase in the U.S. And while Costco reported solid growth around the world, its domestic business continued to lead the way with a 10% comp sales gain last month.

The entrance to a Costco warehouse.

Image source: Costco Wholesale.

Additionally, Costco continued to post solid growth across all of its major merchandise categories in September. It recorded mid-high single-digit comp sales growth for food and sundries and fresh foods. Non-food merchandise performed even better, with low-double-digit comp sales growth, thanks to strong demand for home furnishings, jewelry, tires, and garden items.

Ancillary businesses like Costco's gas stations, food courts, pharmacies, and optical departments also continued to recover in September. Ancillary comp sales surged more than 40%.

Costco deepens its moat

Inflation has started to heat up this year, due to a combination of factors including a shortage of shipping capacity, pandemic-related production losses, and high demand. The uptick in inflation should help Costco continue reporting strong sales growth in the months ahead.

First, Costco has raised prices on certain items, which will boost revenue as long as consumers are willing to pay the increased prices. Second, Costco has immense bargaining power with its suppliers, due to its massive sales volumes and limited selection of items. That helps it keep costs down and limit price hikes compared to rivals, which in turn could help it gain even more market share in an inflationary environment.

If members continue to increase their spending at Costco, it should encourage more of them to upgrade to the pricier executive membership (which offers 2% cash back on most purchases). It will also ease the way for Costco to raise membership prices sometime in 2022.

Finally, rising sales will deepen Costco's moat. Net sales totaled $192.1 billion in fiscal 2021 and should easily surpass $200 billion in fiscal 2022, giving the company virtually unmatched buying power. That will further entrench Costco's price leadership, ensuring the loyalty and continued growth of its membership base.