Influencing Factors for COSTCO Earnings
requires people to pay for annual memberships that grant the privilege to shop
at its warehouse stores. Impressively, Costco offers enough good deals to make
the membership worthwhile for over 60 million households.
As of its
fiscal fourth quarter, which ended Aug. 29, Costco boasted 61.7 million paying
membership households. That was up by 1.1 million from just 16 weeks earlier.
It offers two membership tiers -- standard and executive.
membership runs $60 for the year and gives households access to shop inside
Costco warehouses. The executive membership costs $120 per year, and in
addition to shopping privileges, gives customers 2% cash back on purchases at
generated $1.2 billion in membership fee income in Q4. Note, this revenue has
exceptionally high profit margins. Besides the initial costs to set up a
customer with a picture and a physical card, there is little expense associated
with membership fees. Costco reported $2.3 billion in operating income in Q4,
and it would not be surprising if nearly 50% of that came from membership fee
Raise The Cost of Membership?.....
historically increased membership prices roughly every five years, and the last
time the company raised prices was in 2017, so that time is approaching.
Management might announce when the next price increase will be or discuss its
thought process around the decision.
North American membership retention rates of 91.3% in its most recent quarter.
If a similar percentage of members renew their subscriptions at a higher price,
that will boost operating profits meaningfully.
Costco has a
solid history of beating earnings estimates and is in a good position to
maintain the trend in its next quarterly report.
at the last two reports, this warehouse club operator has recorded a strong
streak of surpassing earnings estimates. The company has topped estimates by
14.97%, on average, in the last two quarters.
For the most
recent quarter, Costco was expected to post earnings of $3.55 per share, but it
reported $3.90 per share instead, representing a surprise of 9.86%. For the
previous quarter, the consensus estimate was $2.29 per share, while it actually
produced $2.75 per share, a surprise of 20.09%.
Wholesale Corp. said Wednesday that its November sales rose to $18.13 billion
from $15.67 billion last year, up 15.7%, as inflation eased from the month
sales for the month increased 14.1%, with online sales climbing 12.2%. There
was some inflation moderation in November compared to October, a company
investor relations representative said on a pre-recorded call. October sales
increased 19.2%, Costco reported last month.
12-week first quarter ended Nov. 21, the company’s net sales
were $49.42 billion, a 16.7% increase from $42.35 billion last
year. For the 13 weeks ended Nov. 28, Costco reported net sales of $54.10
billion, a 16.8% rise from $46.33 billion last year.
Supply Chain Issues....
analysts, like many others, believe supply chain disruption will continue
through 2022, and they think that will benefit Costco earnings.
there are many factors that have led to the crisis at the ports and that a fix
is not something that will come overnight,” the analysts, led by Jason Seidl,
wrote in a commentary.
As for Costco,
it is “well positioned to manage rising
supply chain costs given its scale, importance to vendors, majority localized
sourcing, and cash considerations,” Cowen’s Oliver Chen wrote.
Thoughts about Costco Earnings....
Costco Wholesale had its price target raised by investment analysts at
Raymond James from $540.00 to $565.00 in a report released on Friday. The
brokerage presently has an “outperform” rating on the retailer’s stock. Raymond
James’ price target indicates a potential upside of 7.51% from the company’s
Costco had its price target raised by stock analysts at Loop Capital from
$555.00 to $585.00 in a research note issued to investors on Thursday. The
brokerage currently has a “buy” rating on the retailer’s stock. Loop Capital’s
price objective would suggest a potential upside of 13.34% from the stock’s
current price. The analysts noted that the move was a valuation call.
As well, Costco had its target price lifted
by stock analysts at Citigroup from $505.00 to $540.00 in a report released on
Thursday. The firm presently has a “neutral” rating on the retailer’s stock.
Citigroup’s price target would suggest a potential upside of 1.92% from the
company’s previous close.