Costco Sweeps Expectations With Fiscal Q3 Earnings

Costco shoppers might pay less, but the company was pleasantly surprised to learn it had made more, according to the earnings report released Thursday (May 26). Membership fees are up, comp sales are up, and overall sales are up domestically and internationally by 7.8 percent, for a grand total of $28.86 billion.

In stocks, that translated to an increase of 1.7 percent, landing Costco at $177.50 per share in aftermarket trading on Thursday.

Crushing estimates, net income attributable to Costco rose to $700 million, or $1.59 per share, compared to $1.24 per share a year ago. Costco earned $1.40 per share and recorded a tax benefit of 19 cents per share related to a special cash dividend announced in April.

Analysts had anticipated adjusted earnings of $1.31 per share and revenue of $28.54 billion, according to Thomson Reuters I/B/E/S.

Costco Wholesale Corp, an Issaquah, Washington-based company, attributed the stronger-than-expected quarter to two factors.

The first factor is higher membership fees, up 4 percent in the third quarter ended May 7. Membership fees accounted for almost three quarters of Costco’s 2016 operating income.

The second factor is strong U.S. sales, up 6 percent compared to one year ago in stores that have been open at least that long. This comp sale stat excludes any impacts caused by gas price fluctuations or changes in foreign exchange. Still, it exceeds analysts’ expectations of 3.7 percent comp sales growth.

510 of Costco’s 732 stores are in the U.S. Worldwide, comp sales rose a still-impressive 5 percent.

Costco Wholesale Corp. shares have increased 9 percent since the beginning of the year and the Standard & Poor’s 500 index has increased almost 8 percent. A membership fee increase is slated to go into effect June first, potentially driving even greater growth.