Costco Wholesale Corporation COST posted its fourth-quarter fiscal 2024 results, with earnings surpassing the Zacks Consensus Estimate but revenues falling short of the same. Both the metrics showed year-over-year growth. Comparable sales also increased, though the pace of growth moderated compared to the preceding quarter. This can be attributed to the cautious consumer spending environment and lower gasoline prices.

Costco’s Quarterly Performance: Key Metrics and Insights

Costco reported adjusted earnings of $5.15 per share for the quarter under review, surpassing the Zacks Consensus Estimate of $5.05 and delivering a 2% earnings surprise. The adjusted quarterly number increased 6% from the prior year period. Including a non-recurring tax benefit of $63 million (or 14 cents per share) stemming from a transfer pricing settlement and adjustments to tax reserves, quarterly earnings came in at $5.29 per share.

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Total revenues, comprising net sales and membership fees, reached $79,697 million, marking a 1% increase from the year-ago quarter. However, the metric came below the Zacks Consensus Estimate of $79,753 million.

Costco’s comparable sales rose 5.4% year over year in the quarter, a deceleration from the 6.6% increase recorded in the preceding quarter. Comparable sales in the United States grew 5.3%, while Canada and Other International markets saw increases of 5.5% and 5.7%, respectively.

Costco’s strategic investments, customer-focused approach and merchandise initiatives, along with its emphasis on membership growth, have helped it capture market share and maintain steady revenue growth. By prioritizing value and quality, the company has built strong customer loyalty, leading to an impressive membership renewal rate of 90.5% in the quarter.

Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote

Costco Achieves Membership Growth and Improved Margins

Costco's net sales rose a modest 1% year over year to $78,185 million, while membership fees increased slightly by 0.2% to $1,512 million in the reported quarter. The company ended the period with 76.2 million paid household members, up 7.3% from the prior year. The number of total cardholders grew 7% to reach 136.8 million.

Traffic or shopping frequency improved by 6.4% globally and 5.6% in the United States, while the average transaction or ticket decreased by 0.9% worldwide and 0.3% in the United States.

Comparable sales, excluding gasoline prices and foreign exchange impacts, rose 6.9%. In the United States, comparable sales increased 6.3%, while Canada and Other International markets saw gains of 7.9% and 9.3%, respectively. 

Costco’s e-commerce performance was strong, with comparable sales rising 18.9% year over year, or 19.5% after excluding the impact of gasoline prices and currency fluctuations.

Gross margin expanded 40 basis points year over year to 11%, exceeding our estimate of a 20 basis-point increase. Operating income grew 9.4% to $3,042 million, and the operating margin improved by 30 basis points to 3.8%, faring better than our projected 20 basis-point expansion.