Costco Surpasses Quarterly Revenue and Profit Expectations Driven by Strong Grocery Demand, According to Reuters

By Deborah Mary Sophia

Costco Wholesale exceeded market expectations for both quarterly revenue and profit as shoppers flocked to its stores for affordable groceries and essential items, compensating for weak demand in high-cost discretionary products.

The membership retailer has achieved strong sales growth thanks to its low prices on essential goods and a dedicated customer base, allowing it to increase its market share despite challenging economic conditions.

While the demand for discretionary items such as sporting goods and home goods remains sluggish, robust sales in consumables like fresh produce and snacks have positively impacted Costco. Additionally, its competitive gas prices have attracted new members.

The company reported an almost 8% increase in total paid household memberships by the end of the quarter, resulting in a 13.7% rise in income from membership fees, reaching $1.51 billion.

“Traffic continues to do very well… and our renewal rates remain strong,” stated CFO Richard Galanti during a post-earnings call, noting the positive sales trends for seasonal items like Christmas trees and decorations.

However, shares of the company experienced a nearly 2% drop in after-hours trading. Insider Intelligence senior analyst Zak Stambor attributed this to a broader market sentiment of concern among investors grappling with elevated interest rates.

Telsey Advisory Group analyst Joe Feldman suggested that the stock’s decline could also reflect profit-taking among investors.

“Whether you look at the bottom line, the top line, or just store visits, Costco continues to perform admirably,” noted Stambor, adding that U.S. traffic rose by 5% during the quarter.

Total revenue for Costco increased by 9.5% to $78.94 billion in the fourth fiscal quarter, surpassing analysts’ average forecast of approximately $77.90 billion.

Enhanced product sourcing and improved inventory management contributed to a 42 basis point rise in gross margin, bringing it to 10.6% for the quarter ending September 3.

Costco reported a per-share profit of $4.86, exceeding expectations of $4.79.