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Costco Ups Its Last-Mile Game With $1B Purchase Of Logistics Operator

Costco Wholesale has completed the acquisition of Innovel Solutions, a last-mile logistics specialist. The warehouse grocery chain paid $1B in cash for the company, which was a subsidiary of Transform Holdco, the parent company of Sears and Kmart.

Costco Ups Its Last-Mile Game With $1B Purchase Of Logistics Operator

The move will help Costco deliver large items to customers, which is Innovel's area of expertise. The logistics company operates 11 distribution centers and more than 100 last-mile cross-dock facilities, which facilitate the unloading of materials from trucks or trains directly to vehicles that deliver them to consumers.

"We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate," Costco CEO Craig Jelinek said in a statement.

"Big and bulky" includes a large selection of items, according to Costco, such as furniture and mattresses, large televisions, major appliances, grills and patio furniture, fitness equipment and even wine cellars.

Costco operates 786 warehouse stores, including 547 in the United State, 100 in Canada and the balance in other countries. Innovel has provided third-party last-mile logistics services to Costco since 2015, and will continue to provide such services to Sears and Kmart.

Transform Holdco has been selling non-retail assets lately, such as the DieHard brand, as Sears and Kmart struggle to survive. The company, which now has about 500 stores, will use proceeds of the Innovel sale to pay off all of its non-real estate debt, according to Transform Holdco.

Even before the coronavirus outbreak impacted retail sales nationwide (they dropped 0.5% in February compared with January), Transform Holdco had announced closures among the weaker-performing Sears and Kmart units.

The demand for last-mile delivery services, by contrast, is growing, though the exact size of the market is a matter of debate, and the coronavirus is a wild card that may spur e-commerce sales, and thus demand for last-mile at least temporarily, or cripple retail logistics as a whole.