Costco tops quarterly estimates as Americans seek bargains amid inflation
By Anuja Bharat Mistry
Sept 25 - Costco Wholesale COST.O beat fourth-quarter revenue and profit estimates on Thursday, as Americans hunting for bargains flocked to the membership-only retail chain to snap up lower-priced essentials.
With household budgets under pressure due to rising inflation and a weakening labor market, consumers are increasingly seeking value, which has helped retailers such as Costco buck the broader industry slowdown.
The Trump administration's trade policies have strained consumer wallets and left businesses scrambling to devise plans to mitigate tariffs.
Costco's strategy of keeping limited product categories and focusing on local sourcing in regions such as the Asia Pacific and the U.S. has helped it better navigate the current environment and minimize the tariff impact.
"Being able to navigate tariffs positions them well for a strong holiday shopping season — as long as shoppers open their wallets as usual," said Greg Zakowicz, Ecommerce and Retail advisor with Omnisend.
Strong sales of its private-label brand and maintaining lower prices on certain items, such as butter and eggs, also benefited the company.
"Costco appears to be reinvesting part of last year's membership fee increase into sharper pricing for members while allowing the remainder to flow through to the bottom line, a win-win for both members and shareholders," said Arun Sundaram, analyst with CFRA Research.
The company, which hiked its membership fees last year, saw its earnings from the fees rise 14% to $1.72 billion in the quarter ended August 31.
Its revenue came in at $86.16 billion, compared with analysts' average estimate of $86.06 billion, according to data compiled by LSEG.
Total same-store sales, excluding gas, rose 6.4%, compared with estimates of a 6.44% increase.
Shares of Costco, which rose about 3% this year, were down about 1% after the bell.
Excluding items, the company earned a profit of $5.87 per share, compared with analysts' average estimate of $5.80.
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