Costco Ends Financial Year With Strong Quarter Amid Robust Consumer Demand

 Namnews, 23rd September 2022

Costco’s fourth-quarter results topped Wall Street expectations, helped by strong demand for its fresh food and fuel offerings despite rising inflation in the various countries in which it operates its warehouse outlets.

The retailer’s net sales (excl. membership fees) rose 15.2% to $70.76bn over the 16 weeks ended 28 August after benefitting from strong spending by its more affluent consumers that pay to be members.

Excluding the impacts from changes in petrol prices and foreign exchange, comparable sales in its 578 outlets in the US rose 9.6%. The 107 stores in Canada saw a 13.7% rise, whilst its 153 overseas warehouses (including 29 in the UK) saw sales increase by 11.3%.

Telsey Advisory Group analyst Joseph Feldman said that in the current environment, consumers are looking to save money – including the better-off ones, which Costco caters to. “That bodes well, since they sell a lot of food and consumables, and they help people save money,” he said.

However, the company’s gross margins fell slightly from 10.92% to 10.18% as it battled higher freight and labour costs due to rising inflation and global supply chain disruption.

Meanwhile, Costco’s total inventory at the end of the fourth quarter was up 26% year-over-year, with the company turning up the level of promotions to shift stock.

“Initial seasonal sales seem to be going well… would expect the 26% y-o-y increase to start to head down as it has in just the past few weeks a little bit,” said Chief Finance Officer Richard Galanti.

For the year as a whole, Costco’s net sales increased 16.0% to $222.73bn and net profit climbed from $5.01bn to $5.84bn.

NAM Implications:

• In unprecedented times, nothing beats demonstrable value for money, every time…
• And even in good times (remember?).
• Besides benefitting from a membership fee, an indicator of satisfaction…
• …(but) gross margins fell slightly from 10.92% to 10.18% – still eye-watering for most.