Costco Wholesale beat expectations for the company's Q1 earnings late Thursday and the retailer's board declared a special dividend. Costco stock surged to new highs Friday after pulling back during Thursday's regular session.
The retailer reported a 16.6% increase in earnings to $3.58 per share on 6.2% revenue growth to $57.8 billion in revenue. FactSet analysts expected 11% earnings growth to $3.41 per share on $57.79 billion in revenue.
Net sales rose 6.2% to $56.72 billion while membership fee revenue jumped 8.2% to $1.08 billion. Costco's adjusted comparable sales, which exclude impacts from gas prices and foreign exchange, rose 3.9% companywide. E-commerce comparable sales increased 6.1%. U.S. comparable sales rose 2.6%, trailing the 8.2% increase in Canada and the 7.1% gain internationally.
Costco ended the quarter with 72 million paid household members, up 7.6% from last year. Costco cardholders increased 7.1% to 129.5 million.
In the earnings call, executives noted cheaper prices for bigger items like furniture and TVs due to lower freight costs while food prices have yet to come down. Online sales of food-items, gift cards, pet products and snacks were up in the mid-teens year-over-year while e-commerce appliance sales were up in the mid-20s. Online TV sales were up in the high-single digit range.
The company reported Cyber Week sales were up in the mid-teens year-over-year.
Costco's board of directors also declared a special cash dividend of $15 per share to investors holding COST stock as of Dec. 28, 2023. The dividend will be paid on Jan. 12 with a total payment amount around $6.7 billion.
The announcement marks Costco's fifth-ever special dividend and a record for its largest ever, Yahoo! Finance reported. Costco previously paid out dividends in 2012, 2015, 2017 and 2020. The 2020 special dividend was the second-highest at $10 per share.
Costco reported double-digit earnings growth the past three quarters while revenue growth ranged from low- to upper-single digits over that period.
Price Target Lifted For Costco Stock
Analysts lifted their price targets on COST stock following the earnings results.
Truist hoisted its price target on Costco to $693 from $619 and maintained a buy rating on the shares. The company reported "solid" sales growth that continues to be driven by lower-margin consumables. Still, Costco's pricing model allows the company to maintain strong margins, the firm wrote Friday. Truist said a membership fee increase is unneeded at the moment.
However, increasing the price of Costco memberships is "a question of when, not if," CFO Richard Galanti said in the retailer's Q3 earnings call. The company last increased its membership fees in June 2017. "You'll see it happen at some point. We can't really tell you if it's in our plans or not."
UBS on Friday raised its price target on Costco stock by $85 to $725 and kept a buy rating on the shares. Costco is proving itself as a high-performing business regardless of the macroeconomic environment, the firm wrote. The wholesaler is replicating its exceptional pre-pandemic performance in the post-COVID era, after its solid execution during the pandemic.
Jefferies noted Costco is well-positioned due to its strong value offering, high renewal rates and club expansion plans. Jefferies raised its price target on COST stock to $725 from $680 and maintained a buy rating on the shares.
Costco Stock
Costco stock jumped 4.5% Friday after easing 1.8% Thursday. Shares rallied about 10% following a Sept. 28 breakout from a flat base. COST stock is extended above a buy zone for the pattern and surpassed its prior all-time high of 612.27 from April 7, 2022.
Costco stock has spiked roughly 44% so far this year.
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