Wholesale is not the kind of company that gives a lot of bad news, and Thursday’s earnings report was no different.
Still, Costco (ticker: COST) stock was down 2.6% in after-hours trading on Thursday as investors expected more than they received from retailers’ earnings.
Costco reported net income of $1.87 billion for the quarter, or $4.20 a share, slightly better than the analyst consensus of $4.17 a share. Sales were US$ 70.8 billion.
That Costco made a hit shouldn’t be shocking. Between its long history of upbeat earnings and robust monthly sales updates — the last of its kind among major retailers — Costco Wholesale’s (COST) quarterly earnings results typically don’t include many surprises. This was also true for the fiscal fourth quarter: we already learned earlier this month that comparable sales for the quarter were up double digits when he provided his August update.
However, anything that causes the stock to fluctuate should be considered a gift to investors. While Costco’s stock is down 13% this year, that’s handily beats the
With a drop of 21%, its shares, which have always earned a premium in the market, are not cheap at all. They still change hands at more than 34 times future earnings, around their five-year average of 33.
A negative reaction, then, should not be met with dismay. For those who missed out on Costco’s multi-year run, or hesitate to increase their position when the stock dropped earlier this year, an opportunity to get the stock a little cheaper should always be a treat, especially when there are no signs that something is wrong. with the Costco business.
Buying on the dip has undoubtedly been a profitable gamble in the recent past. Costco is up more than 205% in the last five years, nearly four times the S&P 500. But what about those who fear this means they’ve missed the boat? There are trends that should give you comfort.
Recent monthly same-store sales figures show that Costco comps are still more than 30% above where they were before the pandemic, while traffic and the amount shoppers spend when they visit has increased. This indicates that the market share gains the company has seized during the pandemic are likely to be lasting.
Then there’s the fact that “Costco’s membership trends have never been stronger,” as Baird analyst Peter Benedict noted earlier this month — and could earn additional revenue if it instituted a seemingly timely membership fee increase. , although this is not something to be expected. yet to happen.
The reality is that while high inflation, concerns about the economy’s trajectory, and inventory problems are indeed weighing on retail as a whole, Costco avoids many of those concerns. Its August update showed continued resilience in non-food categories, which suggests there isn’t a glut of goods that its buyers are suddenly feeling too tight to buy, not unexpectedly given its relatively affluent customer base.
Its discount gas may have helped traffic during the summer price spike, but in fact, for the entire year from 2022 through Labor Day, Costco’s traffic was above pre-pandemic levels for 31 out of 36 weeks. of the year, according to data from Placer.ai.
It’s clear that the company’s low-price strategy is resonating. Or as Jefferies analyst Corey Tarlowe said earlier Barron’s“Value retailers like Costco are the best positioned because … when people’s pockets are tight, value wins.”
Investors can too.
write to Teresa Rivas at email@example.com