Costco (COST) 2024 Q2 Earnings

Below is a comparison of Costco's fiscal 2024 second quarter report to Wall Street expectations, based on analyst research by LSEG (formerly Refinitiv).

• Earnings per share: $3.92 vs. $3.62 expected
• Revenue: $58.44 billion vs. $59.16 billion expected.

Costco's net income for the three months ended Feb. 18 was $1.74 billion, or $3.92 per share, up from $1.47 billion, or $3.30 per share, in the year-ago period.

Costco's sales for the quarter increased from $55.27 billion in the year-ago period.

The company's comparative sales increased 5.6% year-on-year, and 4.3% in the U.S. Excluding gasoline price and foreign currency fluctuations, the index increased 5.8% overall and 4.8% in the U.S.

Sales of food and consumer products, including snack foods and beverages, rose mid-single digits in the quarter, Chief Financial Officer Richard Galanti said on an earnings call. Fresh food increased by a low single digit, and non-food increased by a mid-single digit.

He said ancillary business, which includes purchases related to services such as travel, rose by low single digits. Costco's food court, pharmacy and optical center were among the best performers in the quarter, but gasoline fell by low single digits as the price per gallon fell.

More shoppers visited Costco and spent more during the quarter. Traffic grew 5.3% worldwide and 4.3% in the U.S., Galanti said on the earnings call. Average ticket numbers have increased not only in the U.S. but around the world, he said.

Inflation was about flat in the quarter from a year earlier, allowing retailers to lower prices on some goods, Galanti said. For example, he said he was able to reduce the price of reading glasses from $18.99 to $16.99 and the price of a 48-pack of Kirkland Signature batteries from $17.99 to $15.99. He said inflation last quarter was 1% compared to the same period last year.

Galanti said many new products in categories such as sporting goods and lawn and garden will also be priced lower than a year ago due to lower freight and product costs.

Costco has 875 warehouses, 603 of which are located in the United States and Puerto Rico. There are also clubs in about a dozen other countries, including Canada, Mexico, Japan and China.

In the second quarter, Costco opened four new clubs, including three in the United States and one in Shenzhen, China. Galanti said this is the sixth club to open in China. Two of his three new U.S. stores were Costco Business Centers, specifically aimed at small business owners such as restaurateurs.

As of Thursday's close, Costco stock is up nearly $19.% Since the beginning of the year. The stock hit a 52-week high of $787.08 earlier in the day and closed at $785.59, giving the company a market capitalization of nearly $350 billion.

Galanti announced Thursday that Costco has made changes to its website to improve the experience for online shoppers. The company has also tweaked its business to become more digitally savvy.

E-commerce sales for the quarter increased 18.4% year over year.

For example, Costco rolled out its new mobile app homepage in February. It loads in less than 2 seconds, compared to 8 seconds previously. He said the move is significant because about 60% of Costco's e-commerce business is done through mobile apps. mobile browser.

Last week, the company launched Apple Pay for all online members. We're also adding more products to CostConnect, our seller platform that allows members to buy directly from select retail suppliers at discounted prices. The market sells a wide variety of items, including electronics, bicycles, and clothing.

E-commerce sales have also gained momentum in recent months as Costco has gotten better at promoting the value of online items, especially big-ticket items like appliances, mattresses and tires, he said.

Galanti said app downloads increased by 2.8 million in the quarter and now total about 33 million.

Galanti said Costco has been cracking down on membership sharing, which has led to an increase in memberships. He said during the pandemic, the warehouse club has noticed more people using mom and dad's membership cards and leaving them unattended. Member sharing has since expanded as self-checkout became more common at clubs, he said.

He said Costco is now requiring increased checks on membership cards to ensure they match the shopper.

“Are we getting new sign-ups from that? Absolutely,” he said. “Compared to 60 or 70 million members, it doesn't mean as much, but it's more fair and right.”

Still, he said membership sharing at Costco is not as big of an issue as it is at Netflix, another company that has been cracked down. Compared to Netflix, Costco members have to have a physical card with them when they visit the store, making it difficult to share, he said.

Investors have been waiting for Costco to raise membership fees for more than a year. The company has typically raised annual fees about every five-and-a-half years. The last price increase was in June 2017.

But Galanti said the company has not yet increased its rates. However, he added, “It's not a matter of if, it's a matter of when.”

The longtime CFO, who is stepping down, has hosted all but one of Costco's earnings conferences since it went public in 1985. He joked on a conference call Thursday that raising fees would be the job of his successor, Gary Millerchip, the former chief financial officer at Kroger. We will take over in mid-March.

“I joke with Gary, but it's going to be on his watch, not mine,” Galanti said.