Costco Wholesale (COST) reported higher-than-expected profits but fell short of sales forecasts, with executives discussing the company’s first fee hike in seven years and plans for international growth during an earnings call Thursday. Updated investors with the latest information.
Costco sees ‘encouraging’ changes in consumer spending
Chief Financial Officer Gary Millerchip said there were “certainly some signs” that consumers were being cautious with their spending after sluggish growth, but that some discretionary items could be reduced as inflation eased. He added that Costco is encouraged by increased spending. For example, jewelry, toys, gift cards, and home furnishings were some of the product categories that saw sales increase by double digits year over year.
However, Millerchip said that high-priced items such as electronics and appliances “are becoming more and more advertised over time,” and that consumers continue to look for value when considering purchasing big-ticket items. He said that it suggests that there is.
Improving technology and digital sales
Although Costco’s digital sales growth slowed compared to the previous quarter, the company still reported a nearly 19% year-over-year increase in e-commerce sales in its fiscal fourth quarter. CEO Ron Vacris said members have responded positively to some of Costco’s new digital features, such as improved app search and the ability to check warehouse inventory from within the app, with approximately 3,900 downloads of the Costco app. It added that it had reached 10,000 times.
Vakris also said that Costco’s new membership card scanners, which have been installed in much of Europe and are currently in 350 stores in the U.S., will help speed up the checkout process when cards are checked at the door, making Costco It said it could provide more accurate real-time traffic counts.
Increase in membership fees
Costco’s first membership fee increase in seven years took effect on September 1, coinciding with the end of the quarter. Executives said on a conference call Thursday that they did not see a significant change in renewal trends during the first month of the new price range, and that the financial impact of the changes could be felt in late 2025 and 2026. .
The retailer reported 76 million members at the end of the quarter, higher than the 75 million that analysts had expected and up from 71 million in the same period last year. Millerchip said Costco’s membership renewal rate in the U.S. and Canada was 92.9% at the end of the quarter and 90.5% worldwide, and noted that more than half of Costco’s new members in 2024 were also under 40.
New location, international growth plans
Bakris said Costco will open 30 new stores in 2024, including its 600th U.S. store in Wisconsin and its first in Maine, giving Costco a presence in 47 states. Costco plans to open 29 stores in 2025, 12 of which will be outside the U.S. as Costco expands its international efforts, saying the retailer continues to see “huge opportunity” Vakris said.
Costco shares fell 2.2% to $882.10 in intraday trading on Friday, the day after the conference call. They have gained more than a third of their value since the beginning of the year.
