costco It beat Wall Street's quarterly earnings and sales estimates Thursday as e-commerce sales surged and shoppers snapped up jewelry, luggage and furniture.
On the membership-based warehouse club's earnings call, Chief Financial Officer Gary Millerchip said customers have continued to be selective about purchases. But, he added, they have shown they are willing to spend, especially as inflation declines, if they see a “combination of item novelty, quality and value.”
He said Costco's strong sales of meat and produce indicate shoppers are dining out less and cooking more at home.
And, he added, the retailer has seen a “bifurcation with the member,” with some still spending on “high-quality premium cuts” and others with “a gravitation toward those lower-price-per-pound items in categories like poultry and cuts.” “. of beef and pork too.
Here's how the warehouse club fared during the fiscal first quarter compared to what Wall Street expected, according to a survey of LSEG analysts:
- Earnings per share: $4.04 vs. $3.79 expected
- Revenue: $62.15 billion vs. $62.08 billion expected
In the three months ended Nov. 24, Costco's net income rose to $1.8 billion, or $4.04 per share, from $1.59 billion, or $3.58 per share, in the same period. period of the previous year. Revenue rose from $57.8 billion in the same period a year earlier.
Costco has benefited from its reputation for selling bulk items at better prices, as American households feel the cumulative effect of higher food and housing prices. The membership-based club also increased its annual membership fee for the first time in about seven years. The quarterly results are the first Costco has reported since the rate increase took effect in September.
Costco's membership fee revenue totaled $1.17 billion, compared with the $1.16 billion Wall Street expected. It increased almost 8% year over year, excluding the impact of exchange rates.
But on the company's earnings conference call, Millerchip said the membership fee increase hasn't had much effect yet because of deferred accounting. It accounted for less than 1% of rate growth in the quarter, he said.
The company's comparable sales increased 5.2% year over year. In the United States, comparable sales also increased by 5.2%.
Customers visited Costco stores and the website more during the quarter. Traffic increased 5.1% globally and 4.9% in the US. The company's average ticket increased 0.1% worldwide and 0.3% in the US. including the negative impact of gas deflation and exchange rates. If adjusted to exclude them, the average ticket would have increased by 2% worldwide and 2.3% in the US.
Gold and jewelry, gift cards, home furnishings, sporting goods, health and beauty items, luggage kiosks and hardware were up double digits year over year, Millerchip said.
In Costco's fresh produce category, which includes items such as produce, sales grew at a single-digit pace in the quarter, Millerchip said. Beef sales increased by double digits as some members continued to purchase more expensive premium cuts and others purchased lower-cost options, he said.
Costco's private brand, Kirkland Signature, is growing faster than the overall business, Millerchip said. And he added that Costco has been able to reduce prices on some items, such as Kirkland's organic peanut butter, its chicken broth and its Sauvignon Blanc.
He said the club's food courts, optical departments and travel services such as car rentals and cruise bookings also did well in the quarter, but gasoline sales declined by double digits as Prices per gallon fell.
E-commerce sales increased 13% in the quarter compared to the same period a year earlier. The company is gaining market share by shipping large and bulky items, CEO Ron Vachris said on the company's earnings call, and hit nearly 1 million deliveries in the quarter, which was a new record.
Online traffic, conversions and average order value increased year over year, Millerchip said.
Membership renewal rates were 90.4% worldwide, down one-tenth percent, Millerchip said on the company's call. It said renewal rates have dropped slightly as it attracts more new members through digital channels. He said those registrations tend to be renewed at a slightly slower rate.
It ended the quarter with 77.4 million paid household members, a year-over-year increase of about 8%, or 138.8 million cardholders.
Costco also hit new records in its U.S. baking division, selling 4.2 million pies in the three days leading up to Thanksgiving and selling 274,000 whole pizzas in its food courts nationwide on Halloween. Vachris said on the call.
Costco opened seven new clubs in the quarter and plans to open 29 during the fiscal year, including three relocations, Vachris said. Ten of those clubs will be outside the U.S. The company has a total of nearly 900 clubs, with 617 in the U.S. and Puerto Rico.
As of Thursday's close, Costco shares are up nearly 50% so far this year, outpacing the S&P 500's gains of 27% over the same period. Shares closed at $988.39 on Thursday.
