Costco Wholesale's fiscal first-quarter earnings surpassed market expectations, while overall revenue and comparable sales fell short of Wall Street forecasts. Net income rose to $4.04 per share for the quarter ended Nov. 24, up from $3.58 a year earlier, beating the FactSet-polled consensus of $3.76.
Sales increased by 7.5% year-over-year to $60.99 billion, and total revenue grew to $62.15 billion, compared to $57.8 billion last year. Despite these gains, the Street's forecast estimated revenue at $62.18 billion. Comparable sales grew by 5.2% in the quarter but fell below the analysts' expected growth of 5.9%.
Chief Financial Officer Gary Millerchip noted in an earnings call that "Foreign currencies relative to the US dollar negatively impacted sales by approximately 0.3%, while gas price deflation negatively impacted sales by approximately 1.6%." Comparable sales increased by 5.2% in the US, 5.8% in Canada, and 4.7% internationally. Truist Securities highlighted in a Thursday client note the company's strength across categories: "The company continues to deliver strength across categories, with fresh foods and non-foods up (high-single-digits) in the quarter as the offerings are resonating across the board with consumers who have become increasingly selective in their spending." However, they expressed concerns that even for Costco, the valuation appears extremely stretched. Costco's traffic increased by 5.1% globally and 4.9% in the US.
Millerchip stated that the average transaction nudged 0.1% higher worldwide and 0.3% in the US, factoring in headwinds from gas deflation and foreign exchange. E-commerce comparable sales soared 13%, supported by rising traffic, improved conversion rates, and higher average order value. "While strength in volume was a meaningful tailwind to e-commerce sales, hardware, sporting goods, gift cards, and home furnishings all grew double digits year-over-year," Millerchip told analysts. Ending the quarter strong, Costco reported having 77.4 million paid household members and 138.8 million cardholders, both reflecting annual gains exceeding 7%.
The renewal rate in the US and Canada was reported at 92.8%, a slight drop of 0.1% from the previous three-month period, while the worldwide rate decreased by 0.1% to 90.4%. Gross margin improved by 24 basis points year over year, reaching 11.3%. Merchandise costs increased from $50.46 billion in the prior-year quarter to $54.11 billion.
Selling, general, and administrative expenses also saw a rise, climbing to $5.85 billion from $5.36 billion last year..