Costco Falls Short of Revenue Estimates Amid Volatile Big-Ticket Spending, Reports Reuters

By Juveria Tabassum

Costco Wholesale reported a fourth-quarter revenue that fell short of market expectations, primarily due to cautious consumer spending on higher-priced items and declining gasoline prices.

While demand for groceries and essential kitchen items remains strong due to low prices, sales of furniture, home goods, and sporting equipment have been inconsistent, which is negatively impacting Costco’s warehouse sales. Chief Financial Officer Gary Millerchip noted that consumers are being more selective about their spending.

Customers are increasingly seeking deals, leading to increased promotions in appliances and electronics categories. Additionally, the convenience of online shopping continues to influence retail sales, with many consumers opting for various physical and online retailers.

Costco has been focusing on boosting sales through its website and mobile app; however, its e-commerce sales growth slowed to 18.9%, down from 20.7% in the previous quarter. The retailer’s same-store sales were also affected by lower gasoline prices, rising by 5.4% in the quarter ending September 1, compared to a 6.6% increase in the third quarter.

For the fourth quarter, Costco reported revenue of $79.70 billion, a nearly 1% increase, but this was below analysts’ average estimate of $79.97 billion. On a positive note, net income rose to $5.29 per share, surpassing estimates of $5.08, as gross margins improved by 40 basis points.

In July, Costco announced an increase in its annual membership fee, raising it by $5 to $65 for "gold star" members and from $120 to $130 for executive members, effective September 1. Following the earnings report, Costco’s shares fell by 1% in after-hours trading, though they have risen approximately 37% this year.