Costco Wholesale (COST) will report fourth-quarter results Thursday as investors wait to see whether the warehouse club will raise membership prices and has continued to weather cost pressures better than its big-box peers. Costco stock was down early Tuesday.
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With the bulk of Costco’s profits coming from its membership model, the warehouse retailer seems better positioned than discount rivals to keep product costs down for consumers amid the current high inflation environment. Also, Costco customers are better off than a typical “discount” shopper. So while they’re looking for good deals, they have the means to keep shopping.
Meanwhile, its top membership competitors include Walmart’s (WMT) Sam’s Club and BJ’s Wholesale Club (BJ).
In late May, Costco met Wall Street expectations while revenue edged past views in the third quarter. Costco’s EPS increased 11% to $3.04. Net sales increased 16% to $52.6 billion. Same-store sales increased by 14.9%. Comps excluding gasoline and currency shifts climbed 10.7%.
With more than 830 locations in eight countries and nearly 117 million cardholders, Costco is one of the largest membership warehouse chains worldwide. Late last month, Costco reported August sales of $17.55 billion, up 11% from a year ago. Same-store sales increased 8.7% for the month.
Costco Stock; Earnings
Estimates: Analysts predict Costco earnings will grow 7% to $4.17 per share in Q4. Wall Street forecasts a 13% revenue increase to $70.8 billion. Same-store sales are expected to be up 13.7%.
Results: Check Thursday after the market closes.
COST stock: Costco stock dropped 1.4% to 499.73 in Tuesday’s market trading. Shares dipped 0.3% to 502.68 on Monday. COST stock has formed a coup-with-handle pattern with an official 552.81 buy point, according to MarketSmith. The stock is currently below both its 50-day and 200-day moving averages. COST stock is struggling, and is definitely lagging BJ stock, but it isn’t broken either.
BJ stock was down 0.8% to 76.33 Tuesday. Walmart edged down 0.9% on Tuesday.
Costco stock has an 85 Composite Rating out of 99. It has a 84 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 90.
The COST of Business
Costco’s membership model, along with other club stores, means it is typically the last to raise prices and the first to lower prices, according to analysts. This gives these businesses a leg up on competition, but it also means that eventually membership fees will be increased.
At the end of August, Sam’s Club announced price increases for its basic membership fee from $45 to $50 per year. It’s “Plus” tier membership will also go up from $100 to $110. A price hike from one of Costco’s main rivals could mean an increase of its own is on the horizon.
Costco currently has two tiers of membership at $60 and $120. The company’s third-quarter revenue from those memberships increased to $984 million up from $901 million a year ago. The company already signaled earlier this year that the price could go up as soon as June. However, nothing materialized.
In late May, Senior Vice President of Finance Bob Nelson told analysts the company is approaching the time frame when it could increase fees, but added that nothing is definitive.
“Given the current macro environment, the historically high inflation and the burden it is having on our members, and all consumers in general, we think increasing our membership fee today ahead of our typical timing is not the right time,” he said on May 26.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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