Costco Continues Growth Despite Uncertain Market Environment

[Asia Economy Reporter Minji Lee] Costco recorded solid performance in the third quarter (February to April) despite market concerns. Expectations for improved results are rising as the inventory growth rate was not high and the membership renewal rate reached an all-time high.

On the 4th, Costco's stock price stood at $476.25 compared to the previous trading day. It showed a rise of over 4% in the past week due to the strong earnings announcement, but it has fallen about 15.9% since the beginning of the year.

Costco's third-quarter sales reached $52.6 billion, up 16.2% from the same period last year. Operating profit increased by 7.7% to $1.79 billion, net income attributable to controlling shareholders rose 10.9% to $1.35 billion, and earnings per share (EPS) increased 10.5% to $3.04. Sales and EPS exceeded consensus estimates by 2% and 0.7%, respectively. Same-store sales growth by region showed a 6.6% increase in the U.S., with Canada (15.2%) and international markets (5.7%) also showing growth. E-commerce sales rose 7.4% year-over-year.

Steady customer traffic, an increase in average spending per customer, and a high membership renewal rate are positive factors. Overall average customer traffic increased 6.8% year-over-year, and average spending per customer rose 7.6%. Membership fee revenue, which accounts for most of the company's net income, increased 9.2% year-over-year to $984 million, supported by automatic membership renewals and a higher proportion of Executive members. The overall membership renewal rate rose 0.3% quarter-over-quarter, reaching a record high of 90%.

Hanwi, a researcher at NH Investment & Securities, commented, “Despite the unstable market environment, Costco reported results exceeding market expectations,” and added, “It is important to note that the company continues to maintain solid sales and profitability through appropriate cost pass-through.”

Compared to competitors Walmart and Target, Costco performed well. While competitors reported disappointing results due to high inventory levels, Costco's smaller number of stock keeping units (SKUs) made inventory management and demand forecasting easier. Costco has about 3,700 SKUs, whereas Walmart has between 30,000 and 140,000. Although inventory slightly increased due to newly opened stores and inflation effects, it did not significantly impact performance.

Kim Myungjoo, a researcher at Korea Investment & Securities, analyzed, “Costco plans to open 10 new stores globally in the fourth quarter,” and added, “It is unfortunate that there was no news about membership fee increases this time, but attention should be paid to the fact that the membership renewal rate reached an all-time high.”

Currently, Costco's stock price remains low due to weakened investor sentiment about the business environment. In terms of valuation, this year's price-to-earnings ratio (PER) is 36.1 times, similar to last year. Researcher Kim stated, “Contrary to the lowered valuation, Costco's competitiveness has improved compared to the past,” and forecasted, “Considering inflation, the attractiveness of Costco's channel, which sells cost-effective private brand (PB) products and bulk items, will increase.”

This content was produced with the assistance of AI translation services.