Costco’s third-quarter profit below expectations, sales growth slower than expected

Costco (COST) reported earnings for the third quarter of 2023 after the market closed on Thursday, which fell short of analyst expectations.

Same store growth slowed in the previous quarter compared to the previous quarter as higher grocery prices reduced spending, especially on big-ticket items. Total sales for the quarter increased 1.9% year-on-year to $52.6 billion.

Here’s what Costco reported compared to Wall Street’s forecast, based on Bloomberg consensus data:

• Earnings: $53.65 billion vs. $54.66 billion expected

• Adjusted earnings per share: $2.93 vs. expected $3.30

• Existing store sales: Up 0.30% vs 2.91% forecast

  • America: 0.1% decrease vs expected 2.44 increase

  • Canada: -1.0% compared to the forecast of +1.30%

  • Other International: 4.10% increase vs 4.48% increase

Traffic “is still pretty good,” Chief Financial Officer Richard Guaranti said on a conference call with investors. In the third quarter, traffic worldwide he increased by 4.8%, and in the US he increased by 3.5%. However, average airline tickets fell 4.2% globally and 3.5% in the U.S., “mainly due to the slowdown in large non-food discretionary tickets,” Garanti said.

In-store sales of big-ticket and discretionary items such as furniture, small electronics, jewelry and hardware were down 17% year-over-year and accounted for only 8% of warehouse (in-store) sales.

E-commerce sales were also down, down 10.0%. We currently operate e-commerce sites in the US, Canada, UK, Mexico, South Korea, Taiwan, Japan and Australia. Big-tickets in e-commerce sales were down 20% year-over-year, but accounted for 55% of e-commerce sales.

However, the company’s international business continues to gain momentum. As of the third quarter, there are 853 warehouses, including 587 warehouses in the United States and Puerto Rico, 107 warehouses in Canada, 40 warehouses in Mexico, 32 warehouses in Japan, 29 warehouses in the United Kingdom, 18 warehouses in South Korea, and 14 warehouses in Taiwan. Warehouses, 14 warehouses in Australia and 4 warehouses in Japan Three countries in Spain and China are ramping up plans to increase their presence, two in France and one each in Iceland, New Zealand and Sweden .

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Membership fees, the primary source of revenue for wholesale retailers, were $1.04 billion, a tick below Wall Street’s $1.05 billion estimate but up from $984 million a year ago. However, the company did not announce any plans to raise membership fees in the near future.

The last time Costco raised membership prices was in June 2017, when Costco’s Gold Star membership was $60 a year and its Executive membership was $120. The company typically raises prices every five years and seven months on average.

UBS analyst Michael Lasser rated the stock “buy” during the earnings call and said in a recent investor memo that now is a good time to raise membership fees, do you agree with Galanti? asked to confirm.

Mr. Garanti gave a witty answer to the phone call. “Good job Michael, but at the end of the day, the headline was inflation, so if you want to do it, I feel very good about whether you can do it without impacting renewal rates or signups in any meaningful way. But our view at this point is that we have enough influence to drive the business forward and be a beacon of light for our members in terms of retaining them. is our responsibility. For now it will be—not a big deal, but we’ll let you know as soon as we know.”

The report comes as Costco’s stock is up 5.8% year-to-date, outperforming its competitors. Walmart (WMT), the parent company of Sam’s Club, is up 3.5% year-to-date, and BJ’s shares are down 2.9% after weaker-than-expected same-store sales growth in the first quarter. there is

Meanwhile, major retailers Target (TGT) and Walmart (WMT) beat same-store sales estimates in recent quarters, but discretionary sales slowed as well.

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Brooke DiPalma is a reporter at Yahoo Finance. Follow her on her Twitter with her @brooke di palma Or send an email to [email protected].

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