Same-store sales climbed 11.4%, just ahead of the 11% consensus estimate.
Nicholas Kamm/AFP via Getty ImagesCostco Wholesale stock was falling in after-hours trading Thursday, despite a strong fiscal fourth-quarter earnings report. Blame high expectations and pandemic-related costs, but don’t worry too much about the discounter.
After the close of regular trading, Costco (ticker: COST) said it earned $3.13 a share on revenue that rose 12.5% year over year to $52.28 billion. Analysts were looking for $2.85 a share on revenue of $52.1 billion.
Same-store sales climbed 11.4%, just ahead of the 11% consensus estimate. Comparable sales excluding gasoline and currency fluctuation rose 14.1% in the quarter ended Aug. 30, with U.S. comps climbing 13.6%. E-commerce climbed 91.3%. Membership-fee income was up 5.3% to $1.11 billion.
Costco was down 1.9% to $340.25 around 5:15 p.m. Eastern time. That might seem odd, given how well the company outperformed key metrics, but the shares did much the same last quarter.
The results weren’t much of a surprise, given that Costco provided preliminary fourth-quarter sales along with August same-store sales earlier this month. In addition, comparable-sales figures for the prior two months were up double-digits, ahead of analysts’ estimates. E-commerce jumped year over year and from the previous quarter, but matched August’s level.
So once again, expectations might have been for an even bigger beat—especially because the stock is up more than 11% since the last report and 18% year to date. And the past three months of same-store sales have blown past consensus estimates. And while gross margins expanded, they were only modestly ahead of analysts’ expectations. Membership-fee income was a hair below the average analyst estimate.
In addition, the company faced a 47 cent per-share pretax headwind related to the coronavirus crisis, including increased sanitation and premium wages. The fact that it was still able to produce a big bottom-line beat might hearten bulls, but others might worry that these costs will linger.
Essential retailers such as Costco have been helped by the pandemic, as shoppers stock up on food and limit their trips when they do venture out to the store.
According to data from Placer.ai, store traffic had recovered relatively quickly, with visits rising from a 6.8% year-over-year decline in June to a 0.2% rise in July and a 1% gain in August. Momentum appears to be continuing: For the week beginning Aug. 31st, foot traffic was up 10% from 2019 levels.
The company’s results come on the heels of reports from big-box peers Walmart (WMT) and Target (TGT) in August. Both also saw a boost from the Covid crisis, although Target’s ability to show continued same-store sales strength helped it win more favor with investors.
Costco has long been one of the steadiest and strongest retailers, and appears to be still delivering strong same-store sales growth.
That said, the shares now trade for more than 36 times forward earnings. While they have always commanded a premium, that is still above their five-year average, at just below 29 times. That may help explain why the shares were taking a pause. Given how scarce growth is in some areas of retail, investors have been willing to pay up for it, and valuation hasn’t halted Costco’s rally yet. It may not matter for long this time, either.
Write to Teresa Rivas at teresa.rivas@barrons.com
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