Costco's (COST) Q4 Earnings Beat, E-commerce Sales Up Y/Y

·4 min read

Costco Wholesale Corporation COST came out with decent fourth-quarter fiscal 2021 results. While the top line fell short of the Zacks Consensus Estimate, the bottom line registered second straight beat. Impressively, both the metrics improved from the prior-year period. This operator of membership warehouses maintained its decent comparable sales run. Also, the company’s e-commerce sales continued to showcase strength. Yet, supply chain bottlenecks, and higher labor and freight costs remain concerns.

Q4 Earnings & Sales Picture

Costco posted adjusted quarterly earnings of $3.90 per share that handily beat the Zacks Consensus Estimate of $3.55. On a reported basis, earnings came in at $3.76 per share that included a 14 cents charge for the write-off of certain information technology assets. The figure rose meaningfully from $3.13 per share posted in the year-ago quarter. This year-over-year increase in the bottom line can be attributed to higher revenues.

Total revenues, which include net sales and membership fees, were $62,675 million, up 17.4% from the prior-year quarter. The metric, however, fell short of the Zacks Consensus Estimate of $62,812 million.

Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation Price, Consensus and EPS Surprise
Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote

Costco’s growth strategies, improved price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its performance. For the reported quarter, the company’s e-commerce comparable sales rose 11.2% year over year. Excluding the effect of gasoline prices and foreign exchange, the same exhibited an improvement of 8.9% year over year.

Without a doubt, Costco Logistics boosted e-commerce capabilities and facilitates to sell "big and bulky" items. We note that Costco Logistics sales represented 24% of e-commerce sales.

Costco informed that categories such as jewelry, home furnishings, sporting goods, pharmacy, electronics and majors were strong.

With the prevailing trend of digital transformation in the sector, retailers are rapidly adopting the omni-channel mantra to provide a seamless shopping experience. Costco, which shares space with Dollar Tree DLTR, Dollar General DG and Target TGT in the same industry, is not an exception in this regard. It operates e-commerce sites in the United States, Canada, U.K., Mexico, Korea, Taiwan, Japan and Australia.

Delving Deeper

Costco’s net sales grew 17.5% year over year to $61,441 million, while membership fees increased 11.6% to $1,234 million for the reported quarter. Comparable sales climbed 15.5% from the prior-year quarter, reflecting an improvement of 14.9%, 19.5%, and 15% in the United States, Canada, and Other International locations, respectively. We note that traffic or shopping frequency rose 9.2% globally and 8.8% in the United States. Average transaction or basket was up 5.8% globally and 5.6% in the United States.

Excluding the impact of foreign currency fluctuations and gasoline prices, the company witnessed comparable sales growth of 9.4% for the quarter. The United States, Canada, and Other International locations registered a comparable sales increase of 10.3%, 6.7%, and 7.3%, respectively.

Operating income for the quarter increased 17.9% year over year to $2,275 million, while operating margin (as a percentage of total revenues) remained flat at 3.6%.

Store Update

Costco currently operates 817 warehouses, comprising 565 in the United States and Puerto Rico, 105 in Canada, 39 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in Korea, 14 in Taiwan, 13 in Australia, three in Spain, and one each in Iceland, France as well as China.

During fiscal 2021, the company opened 22 warehouses, including two relocations. Management plans to open at least 25 net new units in fiscal 2022, including second warehouses in each of China and France, and its first location in New Zealand.

Financial Aspects

Costco ended the reported quarter with cash and cash equivalents of $11,258 million, and long-term debt (excluding current portion) of $6,692 million. The company’s shareholders’ equity was $17,564 million, excluding non-controlling interests of $514 million. Management incurred capital expenditures of $1.09 billion during the quarter.

Shares of this Zacks Rank #2 (Buy) company have gained 31.3% in the past six months compared with the industry’s 16.7% rally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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