Costco (COST) Q2 2024 Earnings

Costco On Thursday, the corporate missed Wall Street’s holiday-quarter sales expectations despite reporting year-over-year sales growth and powerful e-commerce gains.

Shares of the retailer fell about 4% in aftermarket trading. The company’s shares hit a 52-week high earlier within the day.

Here’s what Costco reported for its second fiscal quarter 2024 in comparison with what Wall Street expected, based on a survey of analysts by LSEG, formerly generally known as Refinitiv:

• Earnings per share: $3.92 vs. expected $3.62
• Revenue: $58.44 billion vs. expected $59.16 billion

For the three-month period ended Feb. 18, Costco’s net income rose to $1.74 billion, or $3.92 per share, compared with $1.47 billion, or $3.30 per share share within the previous yr.

Costco’s revenue rose within the quarter from $55.27 billion within the year-ago period.

The company’s comparable sales increased 5.6% year-over-year and 4.3% within the U.S. Excluding changes in gas prices and foreign currency, the metric rose 5.8% overall and 4.8% within the U.S.

Sales of groceries and sundries, a category that features snacks and beverages, rose mid-single digits within the quarter, Chief Financial Officer Richard Galanti said on the corporate’s earnings call. Fresh foods grew within the high single-digit range, non-foods within the mid-single-digit range.

Ancillary businesses, which include more service-related purchases similar to travel, increased within the low single digits, he said. Costco’s food court, pharmacy and optical centers were the highest performers within the quarter and the value of gasoline fell within the low single digits as the value per gallon fell.

More shoppers got here to Costco and spent more on their shopping trips in the course of the quarter. Traffic rose 5.3% globally and 4.3% within the U.S., Galanti said on the earnings call. The average ticket price has increased within the U.S. and worldwide, he said.

Inflation remained in regards to the same this quarter in comparison with a yr ago, allowing the retailer to lower prices on some items, Galanti said. For example, they managed to scale back the value of reading glasses from $18.99 to $16.99 and reduced the value of Kirkland Signature batteries with 48 pieces from $17.99 to $15.99. In the previous quarter, he said inflation was as much as 1% year-on-year.

Galanti said many recent items in categories similar to sporting goods and lawn and garden may even have lower prices in comparison with last yr attributable to declining freight and raw material costs.

Costco has 875 warehouses, including 603 within the United States and Puerto Rico. There are also clubs in a couple of dozen other countries, including Canada, Mexico, Japan and China.

In the second quarter, Costco opened 4 recent clubs, including three within the U.S. and one in Shenzhen, China. This was the sixth club opening in China, Galanti said. Two of the three recent US locations were Costco Business Centers, which specifically goal small business owners similar to restaurant operators.

As of Thursday’s close, Costco shares were up nearly 19% because the starting of this yr. The stock hit a 52-week high of $787.08 earlier within the day and closed at $785.59, pushing the corporate’s market value to just about $350 billion.

Costco has made changes to its website to enhance the experience for web shoppers, Galanti said Thursday. The company has also optimized its business to operate more digitally.

E-commerce sales increased 18.4% within the quarter in comparison with a yr ago.

For example, Costco in February launched a brand new mobile app homepage that loads in lower than two seconds, in comparison with eight seconds previously – a move it called crucial since about 60% of its e-commerce business comes from its mobile app be handled by mobile browser.

Last week, Apple Pay launched online for all members. And it adds more goods to Costco Next, a seller platform that permits members to purchase directly from a number of the retailer’s suppliers at a reduced price. The marketplace offers a wide selection of things, including electronics, bicycles and clothing, he said.

E-commerce sales even have gained momentum as Costco has gotten higher at highlighting the worth of its online goods in recent months, particularly on big-ticket items like appliances, mattresses and tires, he said.

App downloads increased by 2.8 million within the quarter and currently stand at about 33 million, Galanti said.

Costco saw more member sign-ups as the corporate cracked down on membership sharing, Galanti said. He said the warehouse club noticed more people using their mother or father’s membership card in the course of the pandemic and left it unnoticed. Then, he said, membership sharing increased as self-checkout became more common at clubs.

Now, he said, Costco requires more verification of membership cards to make sure they match the patron.

“Will we get new registrations from this? Absolutely,” he said. “In relation to the 60 or 70 million members, it’s not particularly meaningful, but it’s fairer and the right thing to do.”

However, he said, member sharing at Costco is not as big of an issue because it is at Netflix, one other company that has cracked down. Compared to Netflix, he said, it’s harder for Costco members to share because they still need an individual’s physical card to enter.

Investors have been waiting for Costco to extend its membership fees for greater than a yr. The company typically increased its annual fee about every 5½ years. The last fee increase took place in June 2017.

But Galanti said the corporate isn’t increasing the fee yet. However, he added: “It’s a matter of when, not if.”

The long-time CFO, who’s retiring, has overseen all but one conference call since Costco went public in 1985. On Thursday’s conference call, he joked that the fee hike could be a task for his successor, Gary Millerchip, Kroger’s former CFO, to take over in mid-March.

“I joked with Gary, it will be under his supervision, not mine,” Galanti said.