Costco Wholesale Beats Estimates. Its Stock is Flat.

Dow Jones
09/25

Quarterly earnings for Costco Wholesale beat expectations on Thursday as the retailer navigated economic headwinds while still managing to boost profitability.

Costco's results highlight growing pressure that emerged earlier this earlier this year as rising inflation prompted consumers to rein in spending, even as the retailer continued reporting strong same-store sales, reflecting its staying power among warehouse club-shoppers.

Costco reported $6.75 earnings a share in its fiscal fourth quarter, and revenue rose 11% year over year to $95.7 billion. Analysts had forecast $6.54 earnings a share and $94.9 billion in revenue, according to FactSet. Full-year earnings rose 14% to $20.78 a share as revenue increased 10% to $303.1 billion. Analysts expected earnings a share of $20.50 and $302.3 billion in annual revenue.

The growth rate for membership revenue declined for a third-straight quarter for Costco as fees rose 7.3% year over year to $1.5 billion, missing the mark on analyst estimates of $1.8 billion, suggesting its reliance on high-income shoppers faltered in recent months.

Costco has held onto its $1.50 pricing for its hot dog and soda combo, and the retailer opted to lower the price for many items sold under its Kirkland Signature brands in June.

Same-store sales have grown steadily since then, rising 8.8% in June, 8.9% in July, and 8.4% in August over the prior year, respectively. Labor Day contributed to a slight weakness in sales in August, Costco said.

Costco shares have risen 4.1% this year, but the stock has pulled back 18% from its 52-week closing high of $1,094.32 set in May. At the time, the retailer missed on earnings projections while reporting a deceleration in membership growth.

Shares of Costco were unchanged in afternoon trading after ending Thursday's session down 0.9% to $896.48.

 

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