Higher benefits take bite out of Costco Q2 earnings; testing curbside pickup

Costco Wholesale Corp. reported fourth-quarter earnings below Wall Street expectations, due in part to higher employee wages amid the pandemic, as its sales topped forecasts.

The membership warehouse retailer reported net income of $951 million, or $2.14 per diluted share, for the quarter ended Feb. 14, which includes $246 million pretax, or $0.41 per diluted share, in costs incurred primarily from COVID-19 premium wages, compared to $931 million, or $2.10 per diluted share, in the year-ago period. Analysts were looking for earnings per share of $2.45. Costo recently said it was raising its starting minimum wage to $16 an hour. 

Net sales rose 14.7% to $43.89 billion. Total company comparable sales rose 13%, and were up 11.4% in the U.S. E-commerce comparable sales jumped 75.8%. 

On its earnings call, Costco said it is testing curbside pickup at three locations in Albuquerque.

"Our members have responded to it and basket size have actually surpassed our expectations," said CFO Richard Galanti on the call. "Our focus, of course, is how can we be more efficient at doing it to determine if this offering can become scalable and make economic sense for us."

Costco currently operates 804 warehouses, including 558 in the United States and Puerto Rico, 103 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 14 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China.