On March 7th Costco Wholesale Corporation (COST) posted results for Q2 FY 2024 ending February 18th 2024. The Company exceeded the consensus estimate for earnings by 8.2 percent but was light on sales by 0.1 percent. COSTCO as the leading club chain serves as a bellwether for omni-channel warehouse in-store and on-line buying. The Company is a barometer of consumer confidence, offering groceries, clothing, household necessities in bulk in addition to discretionary appliances, recreational, luxury and electronic items.
For the most recent quarter, the Company earned $1,743 million on revenue (including fuel and membership fees) of $58,442 million with a diluted EPS of $3.92. For the corresponding Q2 of FY 2023 ending February 12th, Costco earned $1,466 million on equivalent revenue of $55,266 million with a diluted EPS of $3.30. Revenue was 5.8 percent higher than in Q2 FY 2023 and net earnings were up by 18.9 percent. Gross margin for Q2 FY 2024 was 10.7 percent, unchanged from the corresponding quarter in FY 2023. Operating income attained 3.4 percent also unchanged from Q2 FY 2023, despite increased freight, transport, wages and utilities.
Comparable global same-store sales for Q2 2024 (excluding fuel and foreign exchange) rose to 5.8 percent. U.S. same store sales were up 4.8 percent; Canada by 9.0 percent and the Other International category, 8.2 percent. E-Commerce was up by 18.2 percent.
Costco did not raise membership fees as expected but in the Q4 2023 investors’ call, the Company commented this is a situation of “when and not if”. There are currently 33.9 million Executive Level memberships at $120 annually representing 46 percent of the total but accounting for 73 percent of sales.
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Richard Galanti Retiring CFO
presided at the Q2 Investors' Call
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On February 18th Costco posted total assets of $66,323 million. Long-term debt and lease obligations attained $10,875 million. Costco had an intraday market capitalization of $343,200 million on March 7th. COST trades with a forward P/E of 49.2 and has ranged over the past fifty-two weeks from $460.80 to $787.08 with a 50-day moving average of $700.41. Costco closed pre-release at $785.59 on March 7th but fell in after-hours trading, post-release by 3.5 percent to $756.64. Twelve-month trailing operating margin was 3.4 percent and profit margin 2.7 percent. The Company generated a return on assets of 7.8 percent and 27.4 percent on equity.
At the end of the recent completed quarter, Costco operated 875 warehouses. There are 603 in the U.S; 109 in Canada; 40 in Mexico; 33 in Japan; 29 in the U.K. and 61others in seven other nations among the E.U., Asia and Australia. This was a net increase of ten warehouses during Q1 with nine added in the U.S.