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Costco Stock Rises After Adjusted Earnings Beat Estimates
Company Points to Competitive Prices as Consumers Seek to Cushion Fuel Cost Surges
Key Takeaways:
- Costco posted higher-than-expected fiscal third-quarter profit, with adjusted earnings of $4.93 a share for the period that ended May 10.
- Store visits and spending per trip rose and renewal rate hit 89.7%, filings showed, as competitive prices and cheaper gasoline helped it gain market share.
- Costco said it is expanding e-commerce and third-party delivery partnerships such as Instacart.
Costco Wholesale Corp. reported higher-than-expected profit in the latest quarter, showing the club chain continues to gain ground among cautious U.S. shoppers.
Earnings, excluding some items, were $4.93 a share during the fiscal third quarter ended May 10, surpassing the average of analyst estimates.
Costco ranks No. 53 on the Transport Topics Top 100 list of the largest private carriers in North America and No. 6 on the wholesale/retail sector list.
Costco has picked up market share in recent years by offering competitive prices, large pack sizes and a treasure hunt of ever-changing products. Gasoline, which is frequently priced lower at Costco than at competitors, is another advantage as consumers look to cushion a global surge in fuel costs.
The upbeat report reinforces that U.S. consumers are still opening their wallets despite a renewed rise in prices and weak sentiment.
The shares rose less than 1% at 4:36 p.m. in extended trading in New York. The stock has advanced 15% so far this year through the close of May 28.
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The largest U.S. warehouse club keeps a relatively limited assortment of about 4,000 products, compared with tens of thousands at traditional grocery chains. The ever-shifting selection, along with its paid memberships, have been effective at drawing shoppers in for repeat visits. Costco customers tend to be wealthier and less vulnerable to economic slowdowns.
Visits to the company’s stores grew and shoppers spent more per trip during the quarter, according to filings from the company. Pharmacy, jewelry, home furnishings and tires were among the top sellers. Membership renewal rate came in at 89.7%, higher than expected.
Costco’s results mirror those of Walmart Inc. and Target Corp., which last week said that consumers remain resilient. While wealthier families continue to spend, lower-income households are increasingly cautious.
The warehouse club is expanding its e-commerce and online services and has partnered with third-party delivery companies such as Instacart Inc. in addition to expanding personalized functions and services. This has helped Costco attract younger shoppers, though they renew their membership at a lower rate than other cohorts.
