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Costco Wholesale
got another strong start to its new fiscal year, as consumer demand for discretionary items perked up at the start of the holiday season.
Costco
reported earnings of $3.58 a share, topping estimates of $3.41 a share, according to FactSet. Revenue of $57.8 billion was largely in line with expectations.
Costco also announced a special cash dividend of $15 per common share, payable Jan. 12. The total sum of the special dividend is approximately $6.7 billion. This is the fifth special dividend in 11 years, said Richard Galanti, chief financial officer.
Shares of Costco rose 1.7% in after-hours trading. The stock is up 38% this year.
Same-store sales were up by 3.8%, in line with consensus estimates. Sales got a boost from sales of food and sundries. Over the Thanksgiving weekend along, the company sold 4 million pies, the company said. It also made $100 million from the sale of gold bars and a $20,000 bonus from the sale of a Babe Ruth autographed index card.
E-commerce same-store sales rose by 6.3%, driven by strong demand during the Black Friday weekend, which saw sales increase in the midteens compared with the prior year, the company said, as demand for discretionary products improved in the quarter. TV sales, for instance, were up in the high-single digits, Galanti said, partially because prices were trending lower.
Indeed, Costco is seeing deflation in “big and bulky items,” such as TVs and furniture sets, thanks to lower freight costs, Galanti said. In some cases, deflation was as much as 20% to 30%, he added.
The company’s solid first-quarter performance is a testament of its resilience amid a challenging macroeconomic environment. Throughout the quarter, Costco added 72 million paid household members, up 7.6% compared with last year, Galanti said. Shopping frequency increased 4.7% worldwide and 3.6% in the U.S.
Store openings were also higher than a year ago, with the company opening 10 locations. For fiscal 2024, Costco plans to open 33 locations, up from 23 a year ago.
This is the last quarter before current CEO Craig Jelinek retires and hands over the reins to Chief Operating Officer Ron Vachris. But don’t expect the company’s strategy to change too much under new management.
“It really is a seamless transition,” Galanti said.
“It’s pretty much steady as she goes.”
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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