Costco beat earnings and revenue estimates for its fiscal third quarter late Thursday as more shoppers flocked to its stores. Costco stock fell near a buy point Friday along with other discounters.
The discount retail giant did not raise membership fees Thursday, an area some investors and analysts have been watching.
The earnings call late Thursday was the first by new CFO Gary Millerchip and new CEO Ron Vachris. Under new management, the earnings report showed "a welcome effort to provide increased transparency into the performance of the business," analyst Phillip Blee of William Blair wrote in a note to clients Friday. He said he does not expect any major changes in operations.
"However, the new management team seemed to be increasingly open about efforts to enhance its digital capabilities, particularly around omnichannel functionality and harnessing membership data for personalization and retail media, which should provide an incremental lift longer term after the company has remained successfully stubborn in adopting innovation in these key areas," Blee added.
Costco Gold Bars Driving E-Commerce Growth
Costco has been stepping up its online efforts, with e-commerce sales jumping 20.7% in Q3. "Total e-commerce sales growth in the quarter was led by gold and silver bullion, gift cards and appliances," CFO Millerchip said on the Costco earnings call, without breaking out exact sales figures for bullion.
The warehouse club expanded into selling gold and silver bars and coins, seen by many as a hedge against inflation, over the past year. Costco sells bullion online and occasionally in its warehouse stores.
Costco Earnings
Estimates: Analysts expected the membership warehouse retail leader to report a 26% EPS rebound to $3.70, FactSet shows. Revenue was seen growing 8%, year over year, to $58.023 billion. Same-store sales were seen climbing 6%.
Results: Costco disclosed EPS of $3.78, a 29% increase, for the quarter ended May 12. That marks its best quarterly earnings gain in years. Revenue rose 9% to $58.515 billion. Same-store sales advanced 6.6%, better than expected.
Outlook: Analysts expect Costco earnings to grow almost 14% for the full fiscal year ending in August, with sales up nearly 5%.
S&P 500 Giant Costco Stock
Costco stock shed 0.7% on the stock market today, paring sharper losses. Shares of the S&P 500 giant slid near a cup-shape 787.08 buy point after hitting an all-time high Thursday ahead of the earnings report. Shares broke out May 10 as Costco reported April sales rose 7% from a year ago and after it said March sales rose 9.4%. The buy zone goes to 826.43.
Discounters Faring Well
Walmart scored a breakaway gap on May 16 on strong earnings and outlook. Walmart stock edged higher to 65.01 Thursday, out of range from its breakout past a 60.89 double-bottom buy point.
Strong earnings also recently boosted shares of TJX, Ross Stores and Costco rival BJ's Wholesale Club.
Broadly, discount retailers have been acting well amid lingering inflation, with Target a notable exception. Walmart earnings rose 22% in its latest quarter, buoyed by even higher-income consumers turning more value conscious. TJX last week also delivered a 22% EPS gain
Burlington Stores crushed earnings estimates early Thursday, with EPS up 61%. Dollar General also beat on strong customer traffic growth.
On Thursday, Burlington stock gapped up 18% to clear a buy point, helping to push off-price peer TJX back into a buy zone. Dollar General sank 8%, down to its 200-day line. Shares of Burlington and TJX retreated Friday but Dollar General rose.
