Costco posted a quarterly profit that beat forecasts, evidence that the big-box retailer remains unaffected by tightening consumer spending.
Published at 8:00 a.m.
These results confirm Costco’s unique status in the retail sector: its wealthy clientele, ready to pay an annual membership, insulates it from the vagaries of the economy. Its constantly renewed offering in giant formats and good value for money attracts consumers. In addition, its house brand Kirkland, affixed to many products, from batteries to cashews (and even tequila, in the United States), is very popular.
Costco gained members during the quarter and 90% of existing members renewed their cards. The average footfall per store increased, but the number of transactions remained stable.
Earnings came in at $4.04 per share for the quarter ended Nov. 24, higher than the average analyst estimate compiled by Bloomberg. The results include a $100 million tax benefit “related to stock-based compensation.”
For several months, Costco has been reporting increased traffic and sales. Food is selling well, as are discretionary items like jewelry and furniture. Comparable sales, excluding gasoline and FX, increased 7.1% in the quarter. Online sales have also increased.
Costco is one of the last retailers to publish its results in 2024. Consumers remain demanding and on the lookout for discounts after years of inflation. But he will be tempted by new and affordable items.
Christmas shopping
“People are very, very basic in their purchases this year,” CEO Ron Vachris observed during his conference call with analysts. Seasonal products sell well and furniture was one of the drivers of online sales ahead of Christmas. There is a preference for high-end products and inexpensive items. Costco executives believe that consumers have shifted their spending toward groceries, to the detriment of restaurants.
“Sales of discretionary items are improving, but the consumer remains focused on value,” commented Jennifer Bartashus and Jibril Lawal, analysts at Bloomberg Intelligence.
Costco, which operates more than 800 stores, raised its membership fees earlier this year. Scanners for membership cards have been installed at the entrance to partly discourage members from lending them out.
The stock ended the trading day up 1% at US$989.35 on the New York Stock Exchange. The stock has risen by half since the start of the year.
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