Tuesday, July 23, 2024

Costco's earnings took a big hit on the back of bullion and silver sales

Costco ( COST ) once again boosted its bottom line thanks to gold bars and warehouse-friendly prices on everyday essentials.

Wholesale Club reported adjusted earnings per share (EPS) of $3.92, beating estimates of $3.62. Revenue came in at $58.44 billion, up 5.7% year over year, but slightly lower than the $59.04 billion per Bloomberg data.

Excluding gas and foreign exchange, same-store sales rose 5.8%.

In the US, same-store sales growth was a better-than-expected 4.8%. Canada beat estimates with 9% same-store sales growth, while international stores posted a better-than-expected 8.2% increase.

Digital sales grew 18% from a year ago, driven by demand for gold bars, silver and appliances, Costco CFO Richard Galanti told analysts on a conference call late Thursday.

Membership fees, a key revenue stream, came in at $1.11 billion, up from $1.03 billion a year ago. That's an improvement from Q1, which earned $1.08 billion.

TETERBORO, NJ - JUNE 28: Customers check out their purchases at a Costco store on June 28, 2023 in Teterboro, New Jersey.  Costco prohibits membership card sharing at its stores.  (Photo by Cana Betancourt/Viewpress)

Customers check their purchases at a Costco store in Teterboro, NJ on June 28, 2023. Costco prohibits membership card sharing at its stores. (Kena Betancur/VIEWpress) (Press VIEW via Getty Images)

A Costco Gold Star membership costs $60 a year, while an Executive membership goes for $120. Some on the Street predicted last year that Costco would raise prices this summer.

Shares of Costco retreated 4.6% in premarket trading on Friday as Wall Street viewed the stock as overvalued at current levels.

“The quarter was strong, but it's hard to see that as a catalyst for the next phase at current valuations. Cost is too good to continue acquiring the stock, but its high multiple (29.0x 2024E EV/EBITDA) and crowded positioning keep us in. Neutral on the stock. Risk/reward at current levels We look at balance,” Citi analyst Paul Lejuez said in a note to clients.

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Shares of Costco are up another 55% over the past year, beating the S&P 500's ( ^GSPC ) gain of 29%.

Income Summary:

Here's how Costco reported against Wall Street estimates for its fiscal second quarter, according to Bloomberg data:

  • Net Sales: $58.44 billion and $59.04 billion

  • Adjusted EPS: $3.92 and $3.62 expected

  • Same Store Sales Growth: 5.8% and expected 4.65%

    • US same-store sales growth: 4.8% vs. 4.09% expected

    • Canada same-store sales growth: 9% vs. 6.31% expected

    • Other International: 8.2% and 6.17% expected

What else caught our attention

  • Costco's US customer traffic increased 4.3% in the quarter.

  • Costco opened its sixth store in China during the quarter in Shenzhen. One more opening in the country is expected this year as part of an effort to open 30 new locations worldwide.

  • Costco is getting into the sushi business. Galanti said on the earnings call: “We recently opened our first fully-operated sushi offering in Issaquah, Washington, across the street from our headquarters, and we have two more planned to open in the near future. We've made this move very successful. For years – years, we've had a sushi program in our Asia Costcos and in many countries there. It has proven to be a category where we can win both in terms of quality and price. The future.”

Brooke DePalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DePalma Or send an email to [email protected].

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