Costco results: lost sales, inventory levels

Costco (COST) reported mixed fiscal fourth-quarter results Thursday after the market closed.

The wholesale giant's earnings per share beat estimates, coming in at $5.29, compared with Bloomberg consensus estimates of $5.07. However, the company reported a slight decline in revenue of $79.7 billion compared to expectations of $79.96 billion.

“It's clear that quality and value have never been more important,” CFO Gary Millerchip told investors on an earnings call. “If you look at our trends year to date, we have seen that as inflation has subsided, our members have started to spend more on non-food items, which is really encouraging for us.”

Costco's same-store sales came in above expectations at 6.9%, compared to estimates of 6.4%, while e-commerce sales rose 19.5%, led by growth in home appliances, health care, among others. and beauty aids, tires, toys and gift cards other items. That was slightly less than the 19.63% increase Wall Street was hoping for.

Non-food reported strong comparable sales in the fourth quarter as consumers increasingly focused on grocery spending. Gold and jewelry, gift cards, toys, home furnishings and tires, among other things, recorded double-digit increases in the quarter.

Costco shares fell 1% in after-hours trading following the report. Year-to-date, stocks are up nearly 40%, while the S&P 500 (^GSPC) has gained 20%.

With 26 “Buy” ratings, 18 “Hold” and one “Sell” rating, there was a lot of optimism surrounding this report.

Ahead of the release, UBS analyst Michael Lasser wrote that the company was “significantly gaining market share” than its competitors with steady traffic growth and a “faster recovery in general merchandise sales.”

Costco's foot traffic rose 10.5% in August, according to data analytics firm Placer.ai, as the company competed on value with major retailers and its closest rivals, Sam's Club (WMT) and BJ's (BJ). Overall, supermarkets and wholesale clubs saw a 4.9% increase in foot traffic.

Millerchip said the value “resonates” with members with lower prices on fresh produce, such as its store-brand chicken tenders.

“We reduced the price by 13% and saw a 21% increase in pounds sold,” Millerchip said. In addition, Costco also lowered prices on other items such as foil, macadamia nuts and olive oil, among others.

CEO Ron Vachris added that penetration of its private label, Kirkland Signature, continues to grow, saying it increases the “value proposition” for members and builds loyalty.

But it's not too focused on others, Millerchip said. “We are our biggest competitor.”

The story continues

UBS analyst Michael Lasser said lower prices could come before the expected benefit comes from higher revenue from membership fees after the hike took effect earlier this month.

Effective September 1, Costco increased the price of its Gold Star membership by $5 to $65, while it increased the Executive membership by $10 to $130.

It was the first time the company had increased its membership fees since 2017, and the company had delayed the increase until the team felt that “inflation was easing and consumers were spending more.”

Read more: How to save when traveling with a Costco credit card

The change is expected to impact around 52 million memberships, just over half of which are executive memberships. The fee increase is expected to increase membership revenue by a high single-digit to low double-digit range.

Membership fee revenue was slightly below Wall Street expectations at $1.51 billion in the quarter, compared to Wall Street's expected $1.54 billion. The price increase will be reflected in the next quarter's results.

The company said renewal rates at the end of the fourth quarter were 92.9% in the U.S. and Canada, down 0.1% from the end of the third quarter. Half of new member sign-ups in fiscal year 2024 were under 40, while executive members now make up 46.5% of paid members.

Costco currently operates 891 warehouses worldwide.

The income overview:

Here's what Costco reported for its fourth-quarter earnings report ended September 1, 2024, compared to Bloomberg consensus estimates.

Revenue: $79.70 billion versus $79.96 billion

Adjusted earnings per share: $5.29 versus $5.07

Total company comparable sales growth, excluding fuel: 6.9% vs. 6.40%

• U.S. same-store sales growth: 6.30% vs. 5.96%

• Same-store sales growth in Canada: 7.90% vs. 7.35%

• Other international sales growth: 9.30% vs. 8.62%

E-commerce growth: 19.5% vs. 19.63%

Income from membership fees: $1.51 billion versus $1.54 billion

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Correction: An earlier version of this article incorrectly stated the number of Costco stores. We regret the error.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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