Gary Millerchip wanted to set the record straight.
Millerchip made his debut last week as Costco's (COST) new chief financial officer after former CFO Richard Galanti stepped down following 40 years with the membership-based retailer.
While the new finance executive couldn't promise analysts that he'd be able to match his predecessor's sense of humor, Millerchip did vow to maintain "the same level of open dialog and transparency."
Related: Costco shares big news on its long-expected membership price hike
And then he got down to the real meat issue.
"Oh, and to clear up some recent media speculation, I also want to confirm the $1.50 hot-dog price is safe," he said during his first conference call on May 30.
Yeah, that may not sound very important to nonmembers, but Costco devotees are very frank about their love for that there doggie.
The numbers show that the company is on a roll: In 2022, Costco sold 156 million hot-dog-and-soda combos, according to Mashed, and then bounced last year to sell just under 200 million of them.
"We need Costco hot dogs to save the world and rebuild," costcodogsol posted on X, after Tesla Chief Executive (TSLA) and X owner Elon Musk declared that "Civilization is careening towards dystopia/utopia."
We need Costco hotdogs to save the world and rebuild 🌭🥤. Only $cost $1.50 pic.twitter.com/2Mz65J2Odm
— Costco Hot Dog (@costcodogsol) June 3, 2024
CFO: Costco wants 'right timing' on fee hike
The response included an illustration of giant wieners with shovels and hard hats smiling down on passing motorists.
(And if you're smirking at that "giant wieners" line, shame on you.)
Millerchip also discussed Costco's membership fees, which have been a hot topic among analysts and consumers alike.
The company charges $60 a year for a Gold Star membership and $120 a year for an Executive Membership, the latter coming with 2% cash back on purchases. These charges have not gone up since 2017.
Related: Popular restaurant chains consider Chapter 11 bankruptcy, liquidation
“We feel really good about membership-renewal rates," he said. "We feel really good about the test of 'are we delivering significantly more value to members than we were or have since we last increased the membership fee?'"
"But I think we are our own probably toughest competitor in that," he said.
Millerchip assured analysts that this is still a case of when Costco increases the fee rather than whether.
"But we're still evaluating those considerations to determine what the right timing is and when we reach that point where we feel it is the right time, of course, we'll be very open and direct in communicating that," he said.
Inflation is much on the minds of money-conscious consumers.
Optimism about the strength of the U.S. economy fell in the second quarter, according to a McKinsey report, the lowest it’s been since the end of last year, with respondents saying they were concerned primarily about rising prices.
Consumers also said they expect to increase their spending over the next three months on most essential items.
TheStreet Pro’s Chris Versace said on Saturday that there are “more signs consumers are shifting their spending to nondiscretionary items, which positions Costco and PepsiCo (PEP) well.”
Costco reported third-quarter earnings of $3.78, well ahead of Wall Street forecasts, while gross-profit margin improved to 10.8% relative to net sales.
Revenue increased 9.1% year-over-year to $58.5 billion.
Comparable-store sales were up 6.5% excluding the impacts of changes in gasoline prices and foreign exchange, while e-commerce sales surged 21% on strong demand for gold bars and silver coins.
And membership fees generated around $1.23 billion in revenue over the quarter, a 7.6% increase from a year earlier.
Analyst cites 'solid' results
Wall Street analysts issued research reports following the earnings announcement.
Loop Capital raised the firm's price target on Costco to $890 from $840 on Monday and kept a buy rating on the shares after its fiscal-third-quarter earnings beat last week.
More Retail Stocks:
- Discount retail chain shares Chapter 11 bankruptcy news
- Amazon launches genius (and free) food delivery service
- Top Lululemon rival makes a bold expansion move
The investment firm sees more improvements to the company's selling, general and administrative expense rate over time, based on the comments from the earnings call.
Costco's core comparisons also grew faster in international markets, driving the overall upside. And its e-commerce grew a strong 21% as the company continued to tout its selection and worked to improve an outdated consumer interface, Loop Capital said.
Stifel analyst Mark Astrachan boosted the firm's price target on Costco to $850 from $800 and maintained his buy rating on the shares. The company reported “solid” fiscal results that “demonstrate the strength in the company's business model," he said.
Related: Analysts reset Lowe's stock price targets ahead of earnings
Astrachan said strong comparable growth, membership growth, and member- retention rates indicate the company's value proposition continues to appeal and contribute to share gains.
The fact that Costco hasn't increased membership fees indicates the company's confidence it can sustain above-average profit growth in the meantime, he said.
And Roth MKM analyst Bill Kirk raised the firm's price target on Costco to $676 from $650 and kept a neutral rating on the shares.
The company is gaining share, including growing in categories where competitors are in contraction, the analyst said. Its profitability remains strong as high return on invested capital opportunities abound, and its membership statistics are "very healthy," Kirk said.
He added, however, that the company's performance is "not above 50 times expected earnings good," and that Costco shares are "close to fairly valued."
Related: Veteran fund manager picks favorite stocks for 2024
