Costco reported stronger-than-expected earnings for its fiscal first quarter, driven by rising e-commerce sales and increased store traffic, CNBC reports.
The membership-based warehouse club benefited from robust consumer demand for items like jewelry, luggage, and furniture, helping it surpass Wall Street’s earnings and revenue projections.
The results underscore Costco’s ability to maintain growth despite broader economic headwinds. The company’s value-driven model continues to attract shoppers navigating higher food and housing costs, with e-commerce emerging as a key driver of revenue growth.
For the three-month period ending November 24, Costco posted earnings per share of $4.04, beating Wall Street’s forecast of $3.79. Revenue reached $62.15 billion, slightly above the $62.08 billion anticipated by analysts. Net income climbed to $1.80 billion, up from $1.59 billion a year earlier.
Comparable sales, a key retail metric, rose 5.2% globally and 5.2% in the US, driven by stronger store traffic and higher average ticket sizes. Customer traffic increased 5.1% globally and 4.9% in the US, while the average transaction value rose 0.1% worldwide and 0.3% in the US Excluding the impact of gas price deflation and foreign exchange rates, Costco’s average ticket grew by 2% globally and 2.3% in the US.
Costco’s e-commerce business showed significant strength, with online sales surging 13% year over year. The company set a new record with nearly 1 million deliveries during the quarter, reflecting Costco’s ability to cater to demand for large, bulky items. Chief Executive Officer Ron Vachris said the company is gaining market share in this segment.
Online traffic, conversion rates, and average order value all increased compared to the same period last year, according to Chief Financial Officer Gary Millerchip.
Despite signs of consumer caution, Costco’s shoppers continued to spend, particularly on items like gold and jewelry, gift cards, sporting goods, home furnishings, and health and beauty products. Each of these categories posted double-digit growth, according to Millerchip.
The company’s fresh food category, which includes produce, experienced high single-digit sales growth, while meat sales climbed at a double-digit pace. Consumer buying behavior varied, with some members opting for premium cuts of meat, while others purchased more affordable options, reflecting a “bifurcation” in member spending, Millerchip noted.
Costco’s private-label brand, Kirkland Signature, is growing at a faster pace than the company’s total business, according to Millerchip. Price reductions on items like organic peanut butter, chicken stock, and Sauvignon Blanc helped drive demand for the brand.
Costco also saw an increase in membership revenue, which totaled $1.17 billion for the quarter, surpassing the $1.16 billion expected by Wall Street. This growth was supported by the company’s recent hike in membership fees, the first in seven years, which took effect in September. However, the immediate financial impact of the fee increase was limited, as the increase is recognized gradually over time.
Despite the fee hike, global membership renewal rates stood at 90.4%, down just one-tenth of a percentage point. Millerchip attributed this slight decline to an increase in digital sign-ups, as new digital members tend to renew at a slightly lower rate. Costco ended the quarter with 77.4 million paid household members, representing an 8% year-over-year increase, and a total of 138.8 million cardholders.
Costco opened seven new warehouse clubs during the quarter, bringing its total to nearly 900 stores, including 617 in the US and Puerto Rico. The company plans to open 29 new clubs during the fiscal year, 10 of which will be outside of the US.
The quarter also saw Costco hit new records in its US bakery and food court divisions. In the three days leading up to Thanksgiving, the company sold 4.2 million pies. On Halloween, its food courts sold 274,000 whole pizzas across the country.
Costco’s stock has been a strong performer this year, rising nearly 50% year-to-date, far outpacing the S&P 500’s 27% gain. Shares closed at $988.39 on Thursday, reflecting investor confidence in the retailer’s ability to drive growth through store traffic, e-commerce, and its popular membership model.
