Costco (COST) announced mixed fiscal fourth-quarter results Thursday after the market closed.
The wholesaler’s earnings per share beat estimates of $5.29, compared to the Bloomberg consensus estimate of $5.07. However, the company’s sales came in at $79.7 billion, slightly lower than the expected $79.96 billion.
“It’s clear that quality and value are more important than ever,” CFO Gary Millerchip told investors on the earnings call. “If you look at our trends year-to-date, we see that our members are starting to increase their spending on non-food items as inflation subsides, which is very encouraging to us.”
Costco stock fell 1.4% in extended trading early Friday morning. Stocks are up nearly 40% since the beginning of the year, compared to a 20% gain for the S&P 500 (^GSPC).
Costco’s same-store sales exceeded expectations, rising 6.9% compared to expectations for a 6.4% increase, while e-commerce sales rose 19.5%, slightly below the 19.63% increase that Wall Street had expected. These increases were driven by increased sales of consumer electronics, health and beauty equipment, tires, toys, and gift cards, among others.
Non-food items posted higher comparable sales in the fourth quarter as consumers gradually moved away from focusing solely on spending on essentials and groceries. Gold and jewelry, gift cards, toys, household goods, tires and more saw double-digit growth in the quarter.
There’s a lot of optimism in this report, with 26 buy ratings, 18 hold ratings, and 1 sell rating on the street.
Ahead of the announcement, UBS analyst Michael Lasser said the company was “clearly gaining market share” with consistent traffic growth and a “faster recovery in general merchandise sales” than its competitors. I am,” he wrote.
Costco’s foot traffic rose 10.5% in August, according to data analysis firm Placer.ai. This is because the company competed on a dollar basis with major retailers and their closest peers, Sam’s Club (WMT) and BJ’s (BJ). Overall, the Superstore and Wholesale Club segment saw a 4.9% increase in foot traffic.
Millerchip said its members’ values are “resonating” with lower prices on fresh produce such as private label chicken tenders.
“When we cut prices by 13%, we saw a 21% increase in pound selling,” Millerchip said. In addition, Costco also reduced prices on other items such as foil, macadamia nuts, and olive oil.
CEO Ron Vacris added that penetration of the company’s private Kirkland Signature brand continues to grow, saying it increases the “value proposition” to members and builds loyalty. Ta.
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But Millerchip says he doesn’t place much importance on others. “We are our own biggest competition.”
Michael Lasser, an analyst at UBS, said the decline could occur ahead of the expected benefit from increased membership fee revenue following the increase in membership fees that took effect earlier this month.
On September 1, Costco increased the price of its Gold Star membership by $5 to $65, and the price of Executive membership by $10 to $130.
This is the first time the company has raised membership fees since 2017, when Costco held off on raising prices until its team felt “inflation started to subside and consumers were spending more.”
Read more: How to save on travel with a Costco credit card
The changes are expected to affect approximately 52 million members, just over half of whom are executive members. Due to the dues increase, member revenue is expected to increase from high single digits to low double digits.
Membership fee revenue for the quarter came in at $1.51 billion, slightly below Wall Street expectations of $1.54 billion. The price increase will be reflected in next quarter’s results.
According to the company, the renewal rate in the U.S. and Canada was 92.9% at the end of the fourth quarter, down 0.1% from the end of the third quarter. Half of new member registrations in 2024 will be under the age of 40, and the proportion of executive members among paid members is currently 46.5%.
The company also doubled its membership card scanning at the door this quarter. This allows operators to understand real-time customer traffic and encourage customers to renew their memberships, Vacris said.
Costco currently operates 891 warehouses around the world.
Revenue summary:
Below is a comparison of Costco’s fourth quarter earnings report ending September 1, 2024 with Bloomberg consensus estimates.
Revenue: $79.7 billion vs. $79.96 billion
Adjusted earnings per share: $5.29 vs. $5.07
Companywide comparable sales growth excluding fuel: 6.9% vs. 6.40%
US same-store sales growth: 6.30% vs. 5.96%
Canadian same-store sales growth: 7.90% vs. 7.35%
Other international sales growth: 9.30% vs. 8.62%
E-commerce growth rate: 19.5% vs. 19.63%
Dues revenue: $1.51 billion vs. $1.54 billion
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Correction: An earlier version of this article incorrectly listed the number of Costco stores. We apologize for the error.
Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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