Costco Rises As Results Show Big-Box Retail’s Resiliency
Costco Wholesale is reinforcing Wall Street’s sentiment that the big-box retailer is equipped to thrive in an e-commerce era.
The company’s shares rose in late trading after first-quarter earnings beat analysts’ estimates.
Profit is only part of the story, though: Chief Executive Officer Richard Galanti said on a conference call he was pleased that membership renewal rates remained steady after a warning last quarter that they could drop. Investors have keyed on the metric as a barometer of consumers’ enthusiasm for the brand.
Costco’s treasure-hunt shopping experience has so far proven resilient in the face of heightened competition from both online and brick-and-mortar peers.
Comparable-store US sales have risen for 14 straight months, and the company has bulked up its online operations with more products and expanded same-day grocery delivery.
That’s assuaged the fears of some investors that Amazon’s encroachment into categories like food, apparel and beauty products could siphon off customers.
“Overall, results were solid with very strong sales numbers and good margins,” Edward Jones analyst Brian Yarbrough said in a note. “We were also positive that membership renewals seem to have stabilized.”
Net income was $1.45 a share in the period ended November 26, according to a statement. Analysts projected $1.34, the average of estimates compiled by Bloomberg.
Membership renewal rates for the US and Canada held at 90%, while gross margins were flat when excluding the impact of fuel deflation. Some analysts had predicted lower margins.
The shares rose as much as 2.7% to $191.50 in late trading. The stock had gained almost 17% this year through Thursday’s close.