Costco on Thursday reported ho-hum quarterly results, with a small topline miss being more than offset by strong profitability to deliver an earnings beat. The report didn’t blow us away, but it still offered plenty of reminders on why Costco investors should stick around. Total revenue in its fiscal 2024 fourth quarter totaled $79.7 billion, missing analysts’ expectations of $79.97 billion, according to estimates compiled by LSEG. Sales were up 1% year over year, though the year-ago quarter had an additional week, skewing the comparison. Earnings per share in the 16-week period came in at $5.29, topping analysts’ forecasts of $5.08, LSEG data showed. The earnings result includes a non-recurring tax benefit of 14-cents per share. But even after removing it, the bottom line results were still better than expected. Costco Wholesale Why we own it: Costco is the best-run retailer in the world, with a business model focused on offering its members a relatively small universe of products at hard-to-beat prices. Costco has succeeded for decades, but the high inflation of recent years has made the company’s value-focused ethos really shine. Competitors: BJ’s Wholesale , Walmart and fellow Club holding Amazon Last buy: June 15, 2020 Initiation date: Jan. 27, 2020 Shares of Costco edged lower in extended trading Thursday by about 1.4%, to around $889 each, adding to modest losses during the regular session. The stock — one of our top-performers this year, up nearly 37% — closed at a record high of $917.08 per share Monday. Bottom line There’s nothing to be concerned about with Costco’s fourth-quarter results, even though sales came up short. The miss was marginal and more than offset by solid year-over-year expansion at both the gross margin and operating margin levels, which enabled the earnings beat. When normalizing for the extra week in last year’s fourth quarter and removing the aforementioned tax-related benefit, adjusted earnings per share were up 12.6% on an annual basis. Membership fee income of $1.5 billion was a tad light, but keep in mind the recent fee hike — announced in July and implemented Sept. 1 — is not factored into Thursday’s results. To be sure, its impact in Costco’s now-underway fiscal 2025 will be “minimal” early on, CFO Gary Millerchip noted on the call. “The vast majority of the benefit will come in the back half of fiscal year 2025 and into fiscal year 2026.” We left the earnings call with increased conviction that Costco remains a top destination for anyone seeking the most bang for their buck — and these days, who isn’t? Costco is staying true to its mission and finding new ways to reduce its own costs. The company is then passing those cost savings on to its members, attempting to cut prices whenever possible and otherwise keep them steady. If Costco’s suppliers are expected to try lowering prices when they can, then “we’re going to start with setting that example and showing the benefits of investing in price…
Read More: We’re upping our price target on Costco after another steady quarter
