(Source – LinkedIn)
Costco Wholesale Corp. delivered impressive fiscal third-quarter results, surpassing Wall Street forecasts for profit, revenue, and same-store sales. Despite the positive earnings report, shares of the membership-based warehouse retailer declined from their record high in after-hours trading.
Costco Wholesale Corp. reports net income of $1.68 billion, or $3.78 per share, for the quarter ending May 12, up from $1.30 billion, or $2.93 per share, in the same period last year. This exceeded the FactSet consensus estimate of $3.70 per share. Total revenue increased by 9.1% to $58.52 billion, above the expected $58.02 billion. Net sales rose 9.1% to $57.39 billion, and membership fees climbed 7.6% to $1.12 billion.
Despite these strong financial results, Costco’s stock fell 1.8% in Thursday’s after-hours session, having closed the regular session up 1.1% at a record $815.34. The dip in stock price follows a substantial rally, with shares up 23.5% year-to-date, outperforming the Consumer Staples Select Sector SPDR ETF’s 5.7% gain and the S&P 500’s 9.8% advance.
Strong Sales Performance and Membership Growth
Comparable sales, or sales from stores open at least a year, rose 6.6%, surpassing the FactSet consensus of 6% growth. This marks the largest increase since a 6.8% rise in the fiscal second quarter of 2023 and the 11th consecutive quarter of beating expectations. In the U.S., same-store sales increased by 6.2%, better than the expected 5.6%, with traffic up 5.5% and the average ticket size up 0.7%.
Internationally, same-store sales grew 7.7% in both Canada and other markets. E-commerce sales saw a significant jump of 20.7% compared to the previous year. The company ended the quarter with 74.5 million paid members, a 7.8% increase from a year ago, and boasted a high renewal rate of 90.5%, including 93.0% in the U.S. and Canada.
During the post-earnings call, Costco Wholesale Corp. highlighted that non-food items experienced the best growth. As inflation has leveled off, discretionary goods have seen improvement, with notable growth in categories such as toys, tires, lawn and garden, and beauty products.
Future Outlook and Strategic Insights
Costco reports robust third-quarter performance underscores its resilience and strategic positioning in the retail market. The company’s ability to consistently exceed expectations in same-store sales growth demonstrates strong consumer demand and effective operational strategies.
As inflation stabilizes, Costco’s focus on non-food items and discretionary goods positions it well for continued growth. The significant increase in e-commerce sales also highlights the company’s adaptability in catering to changing consumer preferences.
With a strong membership base and high renewal rates, Costco continues to solidify its market presence. The retailer’s impressive performance in both domestic and international markets reflects its broad appeal and effective business model.
Despite the short-term dip in stock price, Costco’s year-to-date performance indicates robust investor confidence. As the company continues to innovate and expand its product offerings, it is well-positioned to maintain its growth trajectory and deliver value to shareholders.
In conclusion, Costco’s fiscal third-quarter results highlight its strong financial health and market position. With continued focus on enhancing customer experience and expanding its product range, Costco is poised for sustained success in the competitive retail landscape.
