Costco, the popular retail giant, has reported disappointing revenue for its holiday quarter, failing to meet Wall Street’s expectations. Despite reporting year-over-year sales growth and strong e-commerce gains, the company’s online growth fell short. As a result, shares of Costco fell about 4% in aftermarket trading.
In the fiscal second quarter of 2024, Costco’s earnings per share were $3.92, surpassing the expected $3.62. However, the company’s revenue was $58.44 billion, lower than the expected $59.16 billion. Despite this shortfall, Costco’s net income rose to $1.74 billion compared to $1.47 billion in the previous year.
One area that saw growth for Costco was its comparable sales, which increased by 5.6% year over year and 4.3% in the U.S. The company also saw an increase in the number of shoppers and higher spending during the quarter. Traffic increased by 5.3% globally and 4.3% in the U.S., while the average ticket size also increased.
Costco was able to reduce prices for some items due to flat inflation rates, allowing it to attract more customers. For example, the retailer lowered the price of reading glasses and Kirkland Signature batteries. Moreover, falling freight and commodity costs enabled Costco to offer lower prices on new items in categories like sporting goods and lawn and garden.
In terms of expansion, Costco opened four new clubs during the second quarter, including three in the U.S. and one in China. The company now has a total of 875 warehouses worldwide.
One area where Costco has been focusing on improving is its online presence. The company has made changes to its website to enhance the online shopping experience and has seen e-commerce sales grow by 18.4% compared to the previous year. Costco rolled out a new mobile app homepage that loads faster, as 60% of its e-commerce business is done through its mobile app and browser. Additionally, the retailer introduced Apple Pay and expanded its Costco Next platform, allowing members to buy directly from suppliers at discounted prices.
Membership fees have also been a focus for Costco. The company has seen an increase in sign-ups as it cracked down on membership sharing. Despite this, Costco has not yet raised its annual fee, but CFO Richard Galanti stated that it’s a matter of “when, not if.”
Despite the disappointing revenue results, Costco’s stock has risen nearly 19% since the beginning of the year, reaching a 52-week high. The company’s market value is now close to $350 billion.
In conclusion, while Costco’s online growth may have fallen short of expectations, the company still reported positive sales growth and strong performance in its comparable sales. With its focus on improving the online shopping experience and expanding its offerings, Costco remains a strong player in the retail industry. Investors will be keeping a close eye on future developments, including potential membership fee increases.
