Costco Profit Falls On Coronavirus-Related Costs
Costco Wholesale Corp has reported a 7.5% fall in quarterly profit, as it spent more on wages and sanitising its warehouse clubs and halted sales of some high-margin products due to the COVID-19 pandemic.
Shares of the warehouse club operator fell about 2% in extended trading.
The gains from the unprecedented demand for essentials during the coronavirus outbreak were countered by the company halting sale of items such as hearing aids, opticals and jewellery in certain stores and closing dine-in areas at its food courts.
Costco's gasoline business also took a hit as customers traveled less due to the months-long lockdown, while sales of discretionary products such as luggage and apparel fell.
The members-only retailer recorded a $283 million charge in the third quarter and warned that it expected coronavirus-related expenses to exceed $100 million in the current quarter.
However, Costco, deemed an essential retailer during the lockdown, beat quarterly revenue estimates as people stocked up on basic goods such as paper towels and cleaning supplies before hunkering down in their homes to contain the spread of the virus.
E-commerce sales surged 66.1% on an adjusted basis, as consumers avoided in-person shopping and opted instead to use the option of same-day grocery delivery and facility to pick up online orders at local Costco stores.
Revenue from its high-margin memberships, which ranges between $60 and $120 per annum, rose 5% to $815 million.
Total revenue rose 7.3% to $37.27 billion in the third quarter, beating estimates of $37.13 billion, according to IBES data from Refinitiv.
Net income attributable to Costco fell to $838 million, or $1.89 per share, in the quarter ended May 10, from $906 million, or $2.05 per share, a year earlier.
Analysts on average were expecting it to earn $1.95 per share.