Wholesale is not the kind of company that delivers a lot of bad news and Thursday’s earnings report there is no difference.
However, Costco stock (ticker: COST) fell 2.6% in after-hours trading on Thursday, because investors are hoping for more than they’re getting from earnings. Retailers.
Costco posted net income of $1.87 billion for the quarter, or $4.20 a share, slightly better than the analyst consensus of $4.17 a share. promissory note. Revenue was $70.8 billion.
The fact that Costco dropped a beat is certainly not shocking. Between a long history of upbeat earnings and strong monthly sales updates — the last of its kind among major retailers — Costco Wholesale’s quarterly earnings (COST) results are usually not much of a surprise. . The same was true for its fiscal fourth quarter: We learned earlier this month that its comparative sales rose double digits when it delivered the August update.
However, anything that causes volatility in a stock should be considered a gift to investors. While Costco stock is down 13% this year, that’s easy to beat
Falling 21%, its stock, which has always had a premium in the market, isn’t cheap. They still change hands with more than 34 times their previous earnings, around their five-year average of 33.
So a negative reaction should not be greeted with disappointment. For those who have missed out on Costco’s multi-year run, or are hesitant to add to their positions when stock has dropped earlier this year, the opportunity to get stock a little cheaper is always worth it. preferential treatment, especially when there is no sign of anything amiss. with Costco’s business.
Buying at a discount has certainly been a profitable bet in the recent past. Costco is up more than 205% over the past five years, almost four times the S&P 500. But what about those who fear it means they missed the boat? There are trends that will bring them comfort.
Recent monthly similar-store sales figures show that Costco products are still running 30% more than pre-pandemic levels, while traffic and the amount shoppers spend when they visit more and more. That suggests that the market share the company has won during the pandemic is likely to be sustainable.
Then there’s the fact that “Costco’s membership trends have never been stronger,” as Baird analyst Peter Benedict noted earlier this month — and it could get more revenue if fees increase. membership seemed to be on time, although it wasn’t something that was expected to happen.
The reality is that while inflation is high, worries about the economy’s trajectory and inventory catastrophe are indeed weighing on the entire retail industry, Costco overcame a lot of those concerns. Its August update showed continued resilience in non-food categories, which suggests it doesn’t have so many goods that shoppers suddenly feel too constrained to buy, not in beyond the expectations of a relatively affluent customer base.
According to data from Placer.ai, its drop in gas prices may have helped with a spike in summer traffic, but in fact, for the whole of 2022 through the end of Labor Day, the traffic of Costco has been above pre-pandemic levels for 31 of the 36 weeks of the year, according to data from Placer.ai.
It’s clear that the company’s low-price strategy is resonating. Or as Jefferies analyst Corey Tarlowe said before Barron’s“Value retailers like Costco are in the best position, because … when people’s pockets are tight, value wins.”
Investors can too.
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