Costco Tops Profit Expectations with $50.3 Billion in Total Revenue — What It Means for Stockholders

Costco Wholesale Location. Costco Wholesale is a Multi-Billion Dollar Global Retailer stock photo
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Costco Wholesale delivered another stellar financial performance update on Dec. 9, as the bulk discount retailer breezed past fiscal first-quarter earnings and revenue expectations despite a tough operating environment.

Wall Street applauded the news, pushing Costco’s stock higher in early trading Friday after executives voiced confidence in the chain’s ability to manage inventory, inflation and supply-chain challenges moving forward.

Total revenue for the quarter, including membership fees, rose 16.5% from the prior year to $50.3 billion, Costco said in a press release. Earnings gained 14% to $2.98 a share even as the company had to contend with higher costs and narrower margins due to inflation. Both results easily beat consensus analyst estimates, The Street reported.

Same-store sales for the quarter grew 9.9% in the United States, 8.3% in Canada, 10.9% in other international markets and 13.3% in e-commerce. Membership fee income rose about 10% year-over-year.

For shareholders, the results offered reassurance that Costco has a solid game plan for weathering the current economic headwinds. Despite ongoing inflationary pressures, Costco has worked to limit passing on its own cost increases to members, CNBC reported.

Even though the company’s gross margins fell by 49 basis points year-over-year — mainly due to gasoline inflation — Chief Financial Officer Richard Galanti said on an earnings call with analysts that he thought the margin results were “pretty good.” He offered a similar assessment of Costco’s current inventory position and its strategy to mitigate cost and price increases.

Investing for Everyone

As CNBC noted, investors should be heartened by a couple of things. One is Costco’s expansion plans, which can be taken as a sign that it feels bullish about the future. The company had eight net store openings during the first quarter and plans to open a net 19 new stores during the remainder of the fiscal year.

Another good sign is that Costco might offer a special cash dividend to shareholders — something it has done four times in the past eight years, most recently in November 2020.

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