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Costco Wholesale Corporation (COST - Free Report) came up with second-quarter fiscal 2024 results, wherein the top line missed the Zacks Consensus Estimate but increased year over year. Conversely, the bottom line not only beat the consensus mark but also improved from the year-ago period. Comparable sales also displayed a decent improvement, with the growth rate accelerating on a sequential basis. Costco's e-commerce sales also showcased a sharp rise.
Q2 Earnings & Sales Picture
Costco's second-quarter adjusted earnings per share came in at $3.71, comfortably exceeding the consensus estimate of $3.60 and reflecting substantial growth from $3.30 per share reported in the prior-year quarter. Taking into account the positive impact of 21 cents a share attributable to a tax benefit due to the deductibility of the $15 per share special dividend to the extent received by 401(k) plan participants, quarterly earnings came in at $3.92.
Total revenues, comprising net sales and membership fees, reached $58,442 million, marking a 5.7% increase from the prior year quarter. However, the metric fell short of the Zacks Consensus Estimate of $59,199 million.
In the quarter, Costco's comparable e-commerce sales increased 18.4% year over year. Excluding the impact of gasoline prices and foreign exchange, the metric jumped 18.2%.
Costco Wholesale Corporation Price, Consensus and EPS Surprise
Costco's net sales exhibited decent growth, increasing 5.7% year over year to reach $57,331 million, while membership fees saw an 8.2% increase to $1,111 million in the reported quarter. The company's growth strategies, improved price management and favorable membership trends have all played pivotal roles in contributing to its overall performance.
For the quarter in focus, we had anticipated a 5.6% jump in net sales coupled with a 4.4% increase in total membership fees.
The company ended the quarter with 73.4 million paid household members, marking a 7.8% increase from the previous year. Additionally, the number of cardholders reached 132 million, reflecting a 7.3% rise over the same period.
Comparable sales rose 5.6% year over year in the second quarter, indicating a notable acceleration from the 3.8% increase recorded in the preceding quarter. Notably, this robust performance exceeded our expectation of 4.2% growth in comparable sales for the quarter.
Comparable sales for the quarter under discussion reflect an improvement of 4.3%, 9.2% and 8.6% in the United States, Canada and Other International locations, respectively. Traffic or shopping frequency rose 5.3% globally and 4.3% in the United States.
Excluding the impact of foreign currency fluctuations and gasoline prices, the company witnessed comparable sales growth of 5.8% in the quarter. The United States, Canada and Other International locations registered comparable sales growth of 4.8%, 9% and 8.2%, respectively.
Costco's gross margin expanded 8 basis points to 10.8% in contrast to our expectation of a 10 basis-point contraction. Operating income in the quarter increased 8.4% year over year to $2,062 million. Meanwhile, the operating margin (as a percentage of total revenues) increased 10 basis points to 3.5%, in line with our expectation.
Store Update
Costco currently operates 875 warehouses. These include 603 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, six in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
In the quarter, Costco opened four net new warehouses, including three new locations in the United States and one in China. For fiscal 2024, the company plans to open 30 units, including two relocations.
Financial Aspects
Costco ended the reported quarter with cash and cash equivalents of $9,095 million and long-term debt (excluding the current portion) of $5,865 million. Shareholders’ equity was $20,760 million. Management incurred capital expenditures of roughly $1.03 billion in the quarter and anticipates the same in the range of $4.4 billion to $4.6 billion for fiscal 2024.
Shares of this Zacks Rank #2 (Buy) company have risen 25.9% in the past three months compared with the industry’s rise of 19.3%.
3 Other Picks You Can’t Miss Out On
Here, we have highlighted three other top-ranked stocks, namely Chewy, Inc. (CHWY - Free Report) , Post Holdings, Inc. (POST - Free Report) and Grocery Outlet Holding Corp. (GO - Free Report) .
Chewy, a trusted destination for pet parents and partners everywhere, sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 234.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings suggests growth of about 10.3% and 11.3%, respectively, from the year-ago reported numbers.
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 52.2%, on average.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of around 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Grocery Outlet, a high-growth, extreme-value retailer of quality, name-brand consumables and fresh products, currently carries a Zacks Rank #2. GO has a trailing four-quarter earnings surprise of 17%, on average.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of around 9.4% each from the year-ago reported numbers.
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Costco's (COST) Q2 Earnings Beat, Comparable Sales Rise 5.6%
Costco Wholesale Corporation (COST - Free Report) came up with second-quarter fiscal 2024 results, wherein the top line missed the Zacks Consensus Estimate but increased year over year. Conversely, the bottom line not only beat the consensus mark but also improved from the year-ago period. Comparable sales also displayed a decent improvement, with the growth rate accelerating on a sequential basis. Costco's e-commerce sales also showcased a sharp rise.
Q2 Earnings & Sales Picture
Costco's second-quarter adjusted earnings per share came in at $3.71, comfortably exceeding the consensus estimate of $3.60 and reflecting substantial growth from $3.30 per share reported in the prior-year quarter. Taking into account the positive impact of 21 cents a share attributable to a tax benefit due to the deductibility of the $15 per share special dividend to the extent received by 401(k) plan participants, quarterly earnings came in at $3.92.
Total revenues, comprising net sales and membership fees, reached $58,442 million, marking a 5.7% increase from the prior year quarter. However, the metric fell short of the Zacks Consensus Estimate of $59,199 million.
In the quarter, Costco's comparable e-commerce sales increased 18.4% year over year. Excluding the impact of gasoline prices and foreign exchange, the metric jumped 18.2%.
Costco Wholesale Corporation Price, Consensus and EPS Surprise
Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote
Delving Deeper
Costco's net sales exhibited decent growth, increasing 5.7% year over year to reach $57,331 million, while membership fees saw an 8.2% increase to $1,111 million in the reported quarter. The company's growth strategies, improved price management and favorable membership trends have all played pivotal roles in contributing to its overall performance.
For the quarter in focus, we had anticipated a 5.6% jump in net sales coupled with a 4.4% increase in total membership fees.
The company ended the quarter with 73.4 million paid household members, marking a 7.8% increase from the previous year. Additionally, the number of cardholders reached 132 million, reflecting a 7.3% rise over the same period.
Comparable sales rose 5.6% year over year in the second quarter, indicating a notable acceleration from the 3.8% increase recorded in the preceding quarter. Notably, this robust performance exceeded our expectation of 4.2% growth in comparable sales for the quarter.
Comparable sales for the quarter under discussion reflect an improvement of 4.3%, 9.2% and 8.6% in the United States, Canada and Other International locations, respectively. Traffic or shopping frequency rose 5.3% globally and 4.3% in the United States.
Excluding the impact of foreign currency fluctuations and gasoline prices, the company witnessed comparable sales growth of 5.8% in the quarter. The United States, Canada and Other International locations registered comparable sales growth of 4.8%, 9% and 8.2%, respectively.
Costco's gross margin expanded 8 basis points to 10.8% in contrast to our expectation of a 10 basis-point contraction. Operating income in the quarter increased 8.4% year over year to $2,062 million. Meanwhile, the operating margin (as a percentage of total revenues) increased 10 basis points to 3.5%, in line with our expectation.
Store Update
Costco currently operates 875 warehouses. These include 603 in the United States and Puerto Rico, 108 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, six in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
In the quarter, Costco opened four net new warehouses, including three new locations in the United States and one in China. For fiscal 2024, the company plans to open 30 units, including two relocations.
Financial Aspects
Costco ended the reported quarter with cash and cash equivalents of $9,095 million and long-term debt (excluding the current portion) of $5,865 million. Shareholders’ equity was $20,760 million. Management incurred capital expenditures of roughly $1.03 billion in the quarter and anticipates the same in the range of $4.4 billion to $4.6 billion for fiscal 2024.
Shares of this Zacks Rank #2 (Buy) company have risen 25.9% in the past three months compared with the industry’s rise of 19.3%.
3 Other Picks You Can’t Miss Out On
Here, we have highlighted three other top-ranked stocks, namely Chewy, Inc. (CHWY - Free Report) , Post Holdings, Inc. (POST - Free Report) and Grocery Outlet Holding Corp. (GO - Free Report) .
Chewy, a trusted destination for pet parents and partners everywhere, sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 234.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings suggests growth of about 10.3% and 11.3%, respectively, from the year-ago reported numbers.
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 52.2%, on average.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of around 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Grocery Outlet, a high-growth, extreme-value retailer of quality, name-brand consumables and fresh products, currently carries a Zacks Rank #2. GO has a trailing four-quarter earnings surprise of 17%, on average.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of around 9.4% each from the year-ago reported numbers.