Costco Wholesale Corporation (NASDAQ: COST), a major retail player, released its earnings update for the 17-week fourth quarter and the extended 53-week fiscal year concluding on September 3, 2023. The report showed a promising rise in net sales, with the fourth quarter seeing a jump of 9.4% to $77.43 billion from the previous year's $70.76 billion. The fiscal year also witnessed a 6.7% surge, totaling $237.71 billion in net sales.
On comparing sales, the figures varied across regions. The US showed a modest increase, Canada displayed a more significant rise, and other international regions had a mix. Interestingly, e-commerce dipped slightly.
Net income for the quarter stood at $2.16 billion, translating to $4.86 per diluted share, an improvement from last year's $1.868 billion or $4.20 per diluted share. Over the fiscal year, net income rose to $6.292 billion or $14.16 per diluted share, progressing from the earlier $5.844 billion or $13.14 per diluted share, marking a lucrative year for Costco.
Costco September Sales
Costco also announced strong September sales. In that month, ending on October 1, 2023, the company made an impressive $22.75 billion in sales. This is a significant 6% jump Y/Y when it reported $21.46 billion in sales. The five-week retail sales period included the last week of the 53-week fiscal year 2023 ended September 3, 2023.
Costco showcased robust performance across its various regions. In the United States, the company achieved a 3.2% increase in comparable sales. Meanwhile, in Canada, the growth was even more impressive, with a remarkable 6.7% increase. On the international front, other international locations saw a substantial 10% growth in comparable sales.
Looking at the overall performance of the company, Costco achieved a commendable 4.5% increase in total company comparable sales during this five-week period.
In e-commerce, Costco reported a 3.7% increase in comparable sales.
Costco showcased robust growth driven chiefly by grocery comparable sales, excluding foreign exchange impacts, for the stretch of September through August. Shoppers leaned more towards essential goods, overshadowing discretionary purchases. Notable gains were observed in food and sundries with both sectors soaring to mid to high single digits. The cooler department alongside fresh foods mirrored this upbeat trend.
Among other sectors, bakery and produce outperformed, while non-foods experienced a dip in low to mid single digits. However, segments like jewelry, tires, and automotive bucked this downtrend. Home furnishings, sporting goods, and hardware lagged behind in performance.
On a brighter note, ancillary business sales surged to high single digits, with food court, pharmacy, optical, and gasoline departments leading the charge, marking a positive trajectory for Costco in diversifying its sales channels.
From an investor's perspective, this performance signals resilience and potential opportunities within the retail sector.
Where is Costco Located?
Costco's vast retail network currently spans 861 warehouses across the globe. This includes 591 locations in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand, and Sweden.
Additionally, Costco maintains a strong online presence with e-commerce sites operational in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia.
Retail Investor Perspective
Sales Growth: The reported sales growth, both quarterly and annually, signifies a strong consumer demand and operational efficiency within Costco. It suggests that the company has a robust business model capable of generating increased sales even in a competitive retail environment.
Regional Performance: The differentiation in sales growth across various regions provides insights into regional economic conditions and Costco's market penetration effectiveness. The impressive growth in Canada and other international markets might indicate untapped or under-served markets that could provide further growth opportunities.
E-commerce Performance: The e-commerce figures, though showing a slight dip initially, rebounded with a modest increase in September. This is crucial as e-commerce continues to be a significant growth driver in the retail sector. Costco's performance in this domain reflects its adaptability and competitiveness in the digital retail space.
Product Category Performance: The robust growth driven by grocery sales and the performance variances among different product categories provide a nuanced view of consumer behavior and preferences. It also reflects on Costco's ability to cater to these preferences, indicating a well-aligned inventory management and merchandising strategy.
Investor Returns: The rise in net income and earnings per share is a direct indicator of enhanced shareholder value. It also reflects positively on Costco's management's ability to translate sales growth into bottom-line profitability, which is a crucial metric for investors.
Market Trends: By analyzing Costco's performance, retail investors can glean insights into broader market trends, such as consumer spending habits, online shopping trends, and regional economic conditions, which are invaluable for making informed investment decisions in the retail sector.
Competitive Positioning: Costco's financial results and operational performance provide a benchmark to evaluate the company's position relative to other players in the retail industry. Strong performance metrics indicate a competitive advantage, which is integral for long-term investment considerations.
Long-term Growth Prospects: The overall robust financial and operational performance paints a promising picture of Costco's long-term growth prospects. Retail investors might find Costco to be a viable investment option, given its strong market presence and potential for future growth.