Costco, the popular wholesale club, has once again exceeded earnings estimates with its strong sales growth and digital success. The company reported adjusted earnings per share (EPS) of $3.92, surpassing expectations of $3.62. While revenue came in slightly lower than anticipated at $58.44 billion, it still marked a 5.7% increase compared to the previous year.
One of the key drivers of Costco’s success is its impressive same-store sales growth. Excluding gas and foreign exchange, same-store sales jumped 5.8%. In the United States, same-store sales growth exceeded expectations at 4.8%. Canada also outperformed with 9% same-store sales growth, while international stores saw a higher-than-expected increase of 8.2%.
Digital sales have been a significant contributor to Costco’s growth, with a remarkable increase of over 18% compared to the previous year. CFO Richard Galanti attributed this surge to the demand for gold bars, silver, and appliances. Additionally, membership fees, a crucial revenue stream for the company, rose to $1.11 billion from $1.03 billion the previous year.
Costco offers two types of memberships: Gold Star, priced at $60 per year, and Executive, priced at $120 per year. Despite some predictions that Costco would raise fees this summer, the company has not made any such announcements.
Following the earnings report, Costco’s shares experienced a 4.6% decline in pre-market trading as some analysts believe that the stock is currently fairly valued. Citi analyst Paul Lejuez stated that while the quarter was strong, it is challenging to identify a catalyst for further growth at the current valuation. However, Costco’s shares have still seen an impressive 55% increase over the past year, outperforming the S&P 500’s gain of 29%.
In addition to its financial performance, other notable highlights include a 4.3% increase in customer traffic in the United States and the opening of Costco’s sixth store in China, with plans for more openings in the country throughout the year. Furthermore, Costco has ventured into the sushi business, opening its first fully operated sushi offering in Issaquah, Washington, with two more locations planned for the near future.
Overall, Costco’s strong earnings report reflects its ability to deliver value to customers through its warehouse-friendly prices and diverse product offerings. With its continued focus on digital sales and expansion into new markets, Costco is well-positioned for future success.