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Costco Q3 earnings beat all key metrics after shares closed at an all-time high

Costco (COST) had another strong quarter as consumers sought affordable prices on everyday essentials.

As of Thursday afternoon, the company reported net revenue of $58.52 billion, compared to estimates of $57.98 billion. Its adjusted profit of $3.78 also beat estimates of $3.70.

“We’re definitely winning in the consumables business because we’re seeing the food and out-of-home dining business have calmed down a little bit,” CEO Ron Vachris, who took over in January, said during a call with investors.

Same-store sales, excluding fuel, jumped 6.5%, driven by growth in its international operations (up 8.5%), Canada (up 7.4%) and the United States. United (up 6%).

This comes as consumers look for value in groceries. In April, food prices jumped 1.1% from a year ago, but fell 0.2% from March, according to the U.S. Bureau of Labor Statistics.

As inflation slows, consumers are returning to discretionary items “led by toys, tires, lawn and garden, and health and beauty products,” Chief Financial Officer Gary Millerchip said at the ‘call.

During the quarter, the wholesale retailer saw foot traffic increase year over year, beating the likes of Sam’s Club (WMT) and BJ’s Wholesale Club (BJ), according to Placer.ai.

Vachris said Costco would not need to adopt sweeping price cuts like Target and Walmart to compete for customers.

“(The company’s) buyers are aware of prices daily, weekly, and we review them all monthly, so we’re very happy with where we are right now and our runway to continue to be as competitive as we move forward .” he said.

Costco has reduced prices on some of its private label items, like Kirkland Signature Pine Nuts and Kirkland Signature Frozen Shrimp Skewers.

E-commerce was another bright spot with a 20.7% jump, which Millerchip said was “led by gold and silver bullion, gift cards and home appliances.” New app downloads increased 32% to 35 million.

The company also expanded its partnership with Uber Grocery in the United States and Canada.

Its logistics business saw deliveries increase 28% year-on-year. This delivery company competes with Best Buy (BBY) and offers items such as televisions, computers, appliances, tires and even mattresses.

Costco is testing offering warehouse inventory online, but Vachris said the company intends to preserve its in-store experience.

Membership dues, a key revenue source, are in line with estimates of $1.12 billion, an increase of 7.6% from last year. A Costco Gold Star membership costs $60 per year, while an executive membership costs $120. Some on the Street predicted last year that Costco would raise its fees this summer.

As of the third quarter, the company had 74.5 million total paying members, including 34.5 million executive members.

When asked by an analyst if he would raise fees, Millerchip responded that “that’s always the case when we raise fees, rather than if we raise them.”

Offering advertising solutions could be an opportunity, given Costco’s access to member data. Walmart’s U.S. retail media business, Walmart Connect, saw sales increase 26% in its recent quarterly results.

Costco shares are up 25% year to date, outpacing the S&P 500’s (^GSPC) 10% gain, and closed at a record high ahead of its third-quarter earnings release. The stock was down nearly 2% early Friday after the report was released.

“We continue to believe a premium valuation is warranted, given the superior growth prospects of Costco’s global units, its leading competitive position, and its track record of stock gains,” wrote Rupesh Parikh , an Oppenheimer analyst, in a note to clients ahead of the report, adding that “management can unlock even more shareholder value over time by generating alternative revenue streams.”

Christopher Horvers, an analyst at JPMorgan, wrote that the company’s shares continue to benefit from a higher-income customer base, as well as a long history of consistent market share gains.

COLCHESTER, VERMONT - NOVEMBER 13: A family goes through the checkout line with their groceries at a Costco Wholesale store on November 13, 2023 in Colchester, Vermont.  (Photo by Robert Nickelsberg/Getty Images)COLCHESTER, VERMONT - NOVEMBER 13: A family goes through the checkout line with their groceries at a Costco Wholesale store on November 13, 2023 in Colchester, Vermont.  (Photo by Robert Nickelsberg/Getty Images)

A family checks out with their groceries at a Costco Wholesale store on November 13, 2023, in Colchester, Vermont. (Robert Nickelsberg/Getty Images) (Robert Nickelsberg via Getty Images)

Here’s what Costco reported in its third quarter results, compared to Wall Street estimates:

Net sales: $58.52 billion versus $57.98 billion

Adjusted EPS: $3.78 vs. $3.70

Total company comparable sales, excluding fuel: 6.5%, compared to 5.93%

  • US same-store sales growth: 6% vs. 5.51%

  • Same-store sales growth in Canada: 7.4% vs. 6.96%

  • Other international: 8.5% versus 7.46%

E-commerce Growth: 20.7% versus 11.5%

Membership fees: $1.12 billion versus $1.12 billion

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.

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News Source : finance.yahoo.com
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Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe.Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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