Costco profits soared according to earlier estimates

One of the clear winners of the 2021 investments was Costco (NASDAQ: COT) stock, which has increased 23% year-to-date – beating the S&P 500‘s gain of 18% over that same period.

With such a strong performance, expectations for the company were high ahead of Costco’s fiscal fourth quarter earnings release this week. But the company has kept its promises. Revenue and earnings per share for the quarter both far exceeded analysts’ expectations, thanks to strong double-digit growth in same-store sales.

Here’s a closer look at Costco’s fourth quarter business performance.

Image source: Getty Images.

Strong financial performance

The wholesale retailer’s revenues increased 17.5% year-over-year to $ 62.7 billion in the fourth quarter of the fiscal year. Earnings per share were $ 3.76, up from $ 3.13 a year ago. Analysts on average expected revenue and earnings per share of $ 61.4 billion and $ 3.58, respectively.

A 15.5% increase in same-store sales contributed to this strong performance.

One measure for the quarter that deserves special attention is Costco’s 11.2% year-over-year growth in comparable e-commerce sales. This strong growth rate is particularly impressive when investors consider that it amounted to 90.6% growth in comparable e-commerce sales in the quarter of last year, as many consumers stepped up their orders. in line amid blockages.

Management also noted that its ecommerce app now has more than 10 million downloads. “It is continually improving, with more features to come,” Costco COO Richard Galanti said during the company’s earnings call.

Specifically, management said it will move its digital payments for its Costco credit card from a pilot program to full deployment by mid-October. In addition, members will soon be able to view their warehouse purchase receipts online.

The Costco Advantage in Addressing Supply Chain Shortages

Management said supply chain shortages and inflation concerns persisted during the quarter. As Galanti explained:

From a supply chain perspective, factors putting pressure on supply chains and inflation include delays at ports, container shortages, COVID-related disruptions, shortages of various components, materials raw materials and ingredients, labor cost pressures and [trucks] and driver shortages. Chip shortages also continued, affecting the supply of computers, tablets, video games and major household appliances. To compound these issues, there has also been an inordinate demand for certain items due to the Delta COVID variant, which has led management to start rationing sales of certain items, such as toilet paper, paper towels. , Kirkland Signature water and various cleaning supplies.

But Galanti said Costco is in an advantageous position over some of its competitors, thanks to its financial strength, which allows the company to order items sooner.

Based on Costco’s strong same-store sales growth, continued strength in e-commerce, and better-than-expected earnings in an inflationary environment, management is managing its operating challenges extremely well. The company’s ability to expertly navigate this environment shows why investors are willing to pay a premium for this stock.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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