Costco's revenue growth in the fourth quarter exceeded expectations and slowed down, with the growth rate slowing from over 9% in the previous quarter to less than 1%, while EPS growth slowed to 8.8%, still stronger than expected. Same-store sales growth for the quarter slowed to 5.4%, with customer traffic increasing by 6.4%, but customer spending decreased by 0.9%. Before the first membership fee increase in seven years starting this month, the renewal rate of US and Canadian members in the fourth quarter was close to 93%, and the impact of the fee increase remains to be observed.
The performance of Costco, the favorite of the American middle class and the largest membership warehouse supermarket in the country, is mixed. Profit growth slowed down but was still stronger than expected, while revenue growth exceeded expectations. Although there was an increase in customer traffic supporting profit growth, customer spending is more cautious, affecting revenue.
Post-market trading on Thursday, September 26, Eastern Time in the USA. $Costco (COST.US)$ Announcement of the financial data of the company's 2024 fiscal fourth quarter (hereinafter referred to as the fourth quarter) as of September 1, 2024.
1) Key Financial Figures:
Revenue: The revenue in the fourth quarter was approximately $79.7 billion, an increase of nearly 1% year-on-year, slightly below the analyst's expectation of $79.96 billion, and a growth of almost 9.1% compared to the previous quarter.
Net income: The net income for the fourth quarter was $2.354 billion, a year-on-year increase of 9%.
EPS: Diluted earnings per share (EPS) was $5.29, an 8.8% year-on-year increase, slightly higher than the analyst's expectation of $5.07, and a growth of 29% compared to the previous quarter.
Comparable Sales: Including the impact of gasoline prices and foreign exchange factors, same-store sales in the fourth quarter increased by 5.4%, slightly higher than the analyst's expectation of 4.27%, and compared to a growth of 6.6% in the previous quarter; excluding these impacts, same-store sales in the fourth quarter increased by 6.9%, compared to a growth of 6.5% in the previous quarter.
2) Segment Business Data:
Net Sales: Net sales in the fourth quarter were approximately $78.2 billion, a year-on-year increase of nearly 1%, compared to an 8.9% increase in the previous quarter.
Membership Fees: Membership fees in the fourth quarter were $1.512 billion, a year-on-year increase of 0.2%, compared to a 7.6% increase in the previous quarter.
E-commerce: E-commerce sales in the fourth quarter increased by 18.9%, compared to a 20.7% increase in the previous quarter.
After the financial report was released, Costco's stock price fell by nearly 0.8% on Thursday and accelerated its decline in post-market trading, now falling by over 1%.
Fourth quarter revenue growth exceeded expectations, with an increase in foot traffic but a decrease in consumer spending.
The financial report shows that Costco's revenue and profit in the fourth quarter both slowed compared to the previous quarter. However, the slowdown in EPS earnings was not as severe as analysts expected, while the revenue slowdown exceeded expectations, dropping from over 9% growth to less than 1%. Analysts expected the slowdown to be at 1.3%.
In the fourth quarter, Costco's same-store sales growth slowed in all markets compared to the previous quarter. In the main market, the United States, the same-store sales growth rate in the fourth quarter slowed from 6.6% in the previous quarter to 5.3%. In the previous quarter, same-store sales in Canada and other international markets outside the United States grew by 7.7%, while in the fourth quarter, the growth rates were all below 6%.
Same-store sales data shows that in the fourth quarter, customer traffic increased year-on-year, while customer spending decreased. In the United States, same-store sales saw a 5.6% increase in customer traffic and a 0.3% decrease in spending. In Canada and other international markets, customer traffic grew by 7.7% and 8.1% respectively, while spending decreased by 2.1% and 2.2%. Overall, Costco's same-store customer traffic in the fourth quarter increased by 6.4%, while customer spending decreased by 0.9%.
Comments suggest that Costco's higher-than-expected profits reflect strong consumer spending despite cost pressures. Historical records show that Costco's performance is not affected by macroeconomic challenges because customers need to pay membership fees to shop at Costco, and these customers tend to be more affluent.
Some comments suggest that Costco's lower-than-expected revenue in the fourth quarter was due to cautious consumer spending and the impact of falling gasoline prices.
Membership renewal rates in the U.S. and Canada were nearly 93% for the first time in seven years before the membership fee increase.
In July this year, Costco announced its first increase in membership fees since June 2017. Starting from September 1, the membership fee in the United States and Canada will be raised by 5 dollars to 65 dollars. Last year, Costco generated 4.6 billion US dollars in revenue from membership fees. Analysts are paying attention to this Costco price increase, hoping to understand if it will affect the company's revenue.
This financial report shows that Costco's paid members in the fourth quarter were 76.2 million, a 7.3% year-on-year increase; the global membership renewal rate was 90.5%, with renewal rates in the United States and Canada at 92.9%.
Comments mentioned that the increase in membership fees starting this month may take a few months to see the impact on renewal rates or new member sign-ups.
According to the financial report, Costco currently operates 891 stores globally, including 614 in the USA and Puerto Rico, 108 in Canada, 35 in Japan, 7 in mainland China, and 14 in Taiwan.
Editor/Lambor
