PROPOSED COSTCO WAREHOUSE: PAKENHAM
The Cardinia Shire Council is set to vote on Monday on a proposed Costco warehouse in Pakenham, Victoria—one of several expansion initiatives by the retailer, which recently outpaced Aldi in after-tax profits despite operating fewer stores.
The Proposed Development
The facility is planned for 130 Greenhills Rd, Pakenham. Key details include:
- Size & Zoning: A 14,268 square meter store on a 6.2-hectare site within an industrial planning zone—similar to a previously rejected proposal in Officer South.
- Amenities: 836 car parking spaces and a service station.
- Employment: The developer estimates 250 full-time equivalent jobs and 400 construction jobs.
- Economic Impact: An assessment projects roughly $41 million in annual contributions to the local economy.
Recommendation and Conditions
Council officers have recommended approval, describing the store as a potential anchor for the Pakenham South Employment Precinct. If approved, Costco must meet 54 conditions covering drainage, odour, signage, vehicle access, and road upgrades, including intersection improvements.
Financial Performance
Financial reports show Costco generated nearly $12.6 billion in sales for the 12 months ending August 31, with $499.2 million in after-tax profits.
This compares to Aldi’s reported profits of $403.7 million on Australian sales of $13.3 billion across more than 600 stores.
Market Context & Competition
- Pricing: Woolworths and Coles have implemented price reductions following consumer and political criticism. The government has amended the Food and Grocery Code, effective July 1, to prohibit price-gouging and ensure reasonable margins.
- Impact: During the ACCC supermarket inquiry in late 2024, Coles CEO Leah Weckert stated that a single Costco store can generate six to eight times the sales of a typical Woolworths or Coles outlet.
- Business Model: Over 60% of Costco’s operating profits come from membership fees, raised to $65 in September 2024. The company maintains a stated maximum mark-up of 15% on its products.
Expansion Strategy
Costco currently operates 15 warehouses in Australia. Managing director Patrick Noone has identified Hobart, Geelong, North Sydney, South Sydney, North Perth, and South Adelaide as potential markets.
The company’s long-term objective is to establish 35 locations nationally, with plans to open up to 20 new warehouses within five years.
Two additional stores are planned for Victoria and Western Australia in 2027. The first Australian Costco, opened in Docklands, Melbourne in 2009, has consistently ranked among the top-performing stores globally.
Industry Observations
Colliers Melbourne East national director Gordon Code stated that Costco acts as a destination retailer that can reshape commercial precincts, citing higher rents near the Moorabbin store. Retail strategy consultant Jeremy Barker noted Costco’s strategic site selection and effective operational execution, which provide branded goods at competitive value.