Costco (COST) stock edged 0.3% higher in Friday premarket trading after the warehouse retailer posted mixed fiscal third-quarter results on May 28.
Costco Wholesale Corporation, COST
The stock had already dropped more than 7% since May 20, when other major retailers began reporting. That pullback may have cushioned the reaction to the bottom-line miss.
Costco earned $4.93 per share for the quarter ending May 10, short of the $4.98 analysts expected. Revenue came in at $70.5 billion, up 11.5% year over year, ahead of the $69.68 billion consensus estimate.
Same-store sales rose 6.6% for the quarter. Membership revenue climbed 10.5% from the prior year period, reaching $1.37 billion, though that was below last quarter’s 14% growth rate.
Paid memberships grew 4.1% for the quarter. Renewal rates remained high, according to management.
Digitally-enabled comparable sales climbed 20.4% for the full quarter. Website and app traffic were up 37% year over year. Personalized e-commerce tools delivered conversion rates three times higher than site averages, contributing to nearly $5 billion in e-commerce sales.
Gas was another standout. CEO Ron Vachris told analysts the company saw “record-breaking” gas volumes near the end of the quarter. The national average for gasoline hit $4.42 per gallon, up 25 cents in just a month and up from $3.16 a year ago, per AAA.
“The high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter,” Vachris said.
CFO Gary Millerchip added that members using gas stations are spending more overall and renewing at higher rates.
Gross margin slipped from 11.25% a year ago to 11.04% this quarter. Costco attributed the compression to lower margins on fresh food items like beef and eggs, along with higher transportation costs.
Net income for the quarter was $2.19 billion, up 15% year over year.
Costco has applied to the Trump administration for tariff refunds but said any approved claims won’t directly improve its bottom line. The company plans to pass savings on to customers instead.
“Our goal is to be the first to lower prices and the last to raise them,” Vachris said on the earnings call.
COST stock trades at a forward P/E of 48.5, above Walmart’s forward P/E of roughly 41.
The stock is up about 15% year-to-date, ahead of the S&P 500, and reached new all-time highs earlier this year before the recent pullback.
Stock barely moved in after-hours trading following the report, with the forward P/E sitting at 48.5 and gross margin under pressure.
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