Costco Shares Take A Beating After Q1 Revenue Miss

Costco Wholesale

Costco Wholesale Corporation (NASDAQ: COST)

Rising shopper interest and a strong U.S. economy benefited Costco Wholesale during its fiscal 2019 first quarter, pushing earnings and sales up 20% and 10%, respectively. However, revenue fell short of the expectations of Wall Street analysts.

Announcing the results after markets closed on Thursday, the Issaquah-based company posted said store traffic jumped 4.9% during the quarter, while identical-store sales grew 8.8%, or 7.5% excluding an accounting change, the impact of currency swings and gas prices. Identical-store sales in the U.S. rose 11% while identical-sales for other international locations and Canada grew, 4% and 2.4%, respectively.

Shares of Costco were down $5.96, or 2.63% to $220.55 before markets opened on Friday. The shares closed the regular session on Thursday at $226.51. COST has gained 21% since the beginning of the year and dropped more than 6% in the past three months.

COST Earnings

The company posted net income of $767 million, or $1.73 per share, up from $640 million, or $1.45 per share, in the same period last year. Analysts were expecting adjusted earnings of $1.62 per share according to figures compiled by FactSet.

Revenue came in at $34.31 billion, an increase of 10% from the same three months a year ago. Analysts surveyed by FactSet had called for revenue of $37.6 billion during the quarter.

Costco Executive Comments

Costco Chief Financial Officer Richard Galanti told analysts during a conference call on Thursday that the company will continue to invest in its online retail business. Analysts have raised concerns that Costco’s profit margin is likely to shrink if the company keeps putting more money in its e-commerce segment.

“We feel good about — we’re building to accommodate either more growth in e-commerce and on the delivery side. And we know that we’ll see some of those costs associated with that come down as a percentage of those sales. But we’re not gonna tell you when. It takes some time,” said Galanti.

Costco Wholesale Corporation Profile

Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. The company provides dry and packaged foods, and groceries; snack foods, candies, alcoholic and nonalcoholic beverages, and cleaning supplies; appliances, electronics, health and beauty aids, hardware, and garden and patio products; meat, bakery, deli, and produces; and apparel and small appliances.

It also operates gas stations, pharmacies, optical dispensing centers, food courts, and hearing-aid centers; and engages in the travel business. In addition, the company provides gold star individual and business membership services. As of September 2, 2018, it operated 762 membership warehouses, including 527 warehouses in the United States, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 15 in Korea, 13 in Taiwan, 10 in Australia, 2 in Spain, 1 in Iceland, and 1 in France.

Further, the company sells its products through online. The company was formerly known as Costco Companies, Inc. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington. – Yahoo Finance