Costco earnings beat estimates, sales miss; comps up 5.4% fueled by nonfood
Costco Wholesale Corp. ended its fiscal year with fourth-quarter earnings ahead of Street estimates and annual sales just short of $250 billion.
The membership warehouse retailer released its earnings days before a potential strike at 36 East and Gulf Coast ports. Costco CEO Ron Vachris addressed the issue on the post-earnings call, saying the company had contingency plans to work around possible shipping delays and has done several different things “to get holiday goods in ahead of this time frame.”
“Our buyers are all over it,” he told analysts. “They’re watching it closely, and we’ve taken as many preemptive measures as we could to prepare for this.”
[READ MORE: Retailers sound alarm on imminent port strike]
Costco reported fiscal net income of $2.35 billion, or $5.29 a share, for the quarter ended Sept. 1, down from $2.16 billion, or $4.86 a share, in the year-ago quarter. Analysts had expected earnings per share of $5.08.
Revenue inched up 1% to $78.2 billion from $77.4 billion, missing estimates of $79.91 billion Total same-store sales rose 5.4% amid lower gasoline prices. Same-store sales rose 5.3% in the U.S. and 5.5% in Canada. International comps rose 5.7%. E-commerce comp sales were up 18.9%.
Excluding the impacts from changes in gasoline prices and foreign exchange, total same-store sales rose 6.9%. Adjusted U.S. comps rose 6.3%.
Traffic and shopping frequency increased 5.6% year-over-year. The average transaction fell 0.9% worldwide and 0.3% in the U.S. The average ticket less fuel was up 0.6% domestically.
Nonfoods led the way with the highest comparable sales in the fourth quarter. Gold and jewelry, gift cards, toys, seasonal, home furnishings, tires and housewares, were all were up double digits in the quarter. Health and beauty aids also performed well as the company expanded and elevated the category with new high-end SKUs, including assorted luxury fragrances.
“We have seen that as inflation has dissipated, our members have started to spend more on nonfood items, which is really encouraging in our mind,” Millerchip told analysts. “And what we're really pleased about is the widespread nature of that across the different categories that we've seen in non-foods.”
At the same time, consumers have become more promotional over time in categories such as appliances and electronics, he added, with members looking for deals.
"There's definitely some signs that the consumer is being very choiceful in how they're spending their dollars," Millerchip said.
In July, Costco said it would raise its annual membership fee by $5 to $65, and to $130 from $120 for executive members, effective Sept. 1. It’s the company’s first membership fee increase since June 2017.
For the 52-week fiscal year, Costco’s net sales rose 5% to $249.6 billion. Net income was $7.367 billion, $16.56 per share, compared to $6.292 billion, $14.16 per share.
Costco currently operates 891 warehouses, including 614 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the United Kingdom, 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, five in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
The company also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
