Costco Wholesale Corp (Nasdaq: COST) reported mixed fiscal 2023 third-quarter results. While the earnings surpassed Wall Street estimates, revenues missed analysts’ expectations. The company’s performance was negatively impacted by a decline in consumer spending on bulk goods against the backdrop of high inflation and uncertainty in the job market. The stock closed at $507.26, up $20.71 or 4.26% from the prior close.
Issaquah, Washington-based Costco reported third-quarter revenues of $53.65 billion, up 2% from $52.60 billion in the similar quarter of fiscal 2022.
For the third quarter, which ended May 7, 2023, the big-box retailer posted net income of $1.30 billion, or $2.93 per share, compared with $1.35 billion, or $3.04 per share, in the quarter that ended May 8, 2022.
The third quarter results include a non-recurring charge of $298 million, primarily related to the termination of its charter shipping operations. Excluding charges, Costco posted third-quarter adjusted earnings of $3.43 billion, surpassing forecasts of $3.29 per share.
Segment wise:
- Net sales rose by 1.90% m-o-m to $52.60 billion.
- Membership fees were $1.044 billion, up 6% from last year.
The company reported adjusted same-store sales of 3.50% versus 2.50% forecast by the Street. The US comp sales grew by 1.80%. Likewise, Canada’s same-store sales increased by 7.40%. However, e-commerce sales declined 10%.
In the recent quarter, Costco recorded an operating income of $4.79 billion, up from $4.45 billion in the corresponding quarter of fiscal 2022. Average daily transactions declined by 3.50% in the US. Similarly, daily transactions fell by 4.20% worldwide. The decline was led by a drop in sales of big-ticket items. At the end of the third quarter, Costco had a chain of 853 warehouses, including 107 in Canada, 40 in Mexico, and 587 in the US.
Furthermore, the retailer operates e-commerce centers in Canada, the UK, the US, Korea, Mexico, Japan, Taiwan, and Australia.
Notably, Costco posted net sales of $17.85 billion in April, up 3% from the prior year.
Interestingly, Costco’s CFO, Richard Galanti, stated that the company’s shrinkage has largely remained unchanged. In the retail sector, the saying “shrink” indicates inventory loss, primarily due to theft.
The mixed economic data is expected to keep the stock of Costco range bound in the short term.
The historical price chart indicates that the stock of Costco is ascending after testing support at 475. The next major resistance is anticipated to be near 530. Additionally, the stock is trading above its 50-day moving average, while the stochastic indicator is ascending toward the bullish zone. Therefore, we anticipate Costco’s stock to remain in an uptrend in the short term.
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