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Costco's (COST) Q4 Earnings Top, Comparable Sales Rise 13.7%

·5 min read

Costco Wholesale Corporation COST came out with decent fourth-quarter fiscal 2022 results, wherein the top and bottom lines not only came ahead of the Zacks Consensus Estimate but also improved year over year. The quarter marked the sixth straight earnings beat. This operator of membership warehouses maintained its impressive comparable sales run. The company’s e-commerce sales continued to exhibit strength. Costco remains a popular go-to destination for shopping.

Q4 Earnings & Sales Picture

Costco posted fourth-quarter earnings of $4.20 per share, which handily beat the Zacks Consensus Estimate of $4.12. The bottom line increased sharply from earnings of $3.76 per share reported in the year-ago period. Last year’s quarterly number was negatively impacted by a write-off of information technology assets of $84 million pre-tax (or 14 cents a share). Excluding this, the prior-year quarter’s adjusted earnings came in at $3.90 per share.

Total revenues, which include net sales and membership fees, were $72,091 million, up 15% from the prior-year quarter. The metric surpassed the Zacks Consensus Estimate of $71,841 million.

Costco’s growth strategies, improved price management, decent membership trends and the increasing penetration of the e-commerce business have been contributing to its performance.

In the reported quarter, the company’s comparable e-commerce sales rose 7.1% year over year. Excluding the impact of gasoline prices and foreign exchange, the same exhibited an improvement of 8.4% year over year.

 

Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation Price, Consensus and EPS Surprise
Costco Wholesale Corporation Price, Consensus and EPS Surprise

Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote

Delving Deeper

Costco’s net sales grew 15.2% year over year to $70,764 million, while membership fees increased 7.5% to $1,327 million in the reported quarter. Comparable sales climbed 13.7% from the prior-year quarter, reflecting an improvement of 15.8%, 13.4% and 2.9% in the United States, Canada and Other International locations, respectively.

We note that traffic or shopping frequency rose 7.2% globally and 5.2% in the United States. The average transaction or ticket was up 6% globally and 10% in the United States.

Excluding the impact of foreign currency fluctuations and gasoline prices, the company witnessed comparable sales growth of 10.4% in the quarter. The United States, Canada and Other International locations registered comparable sales increases of 9.6%, 13.7% and 11.3%, respectively.

The operating income in the quarter increased 9.8% year over year to $2,497 million, while the operating margin (as a percentage of total revenues) contracted 10 basis points to 3.5%.

Store Update

Costco currently operates 838 warehouses — 578 in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom, 17 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two each in France and China and one in Iceland.

In the final quarter, Costco opened nine net new warehouses. In fiscal 2022, the company opened 26 warehouses, including three relocations. These led to a net increase of 23 locations.

In fiscal 2023, the company plans to open 29 new warehouses, including four relocations. These will lead to net 25 new warehouses, which consist of 15 in the United States and 10 in Other International, including the first locations each in New Zealand and Sweden, and the third and fourth locations in China.

Financial Aspects

Costco ended the reported quarter with cash and cash equivalents of $10,203 million and long-term debt (excluding the current portion) of $6,484 million. Shareholders’ equity was $20,642 million, excluding non-controlling interests of $5 million.

Management incurred capital expenditures of $1.26 billion in the fourth quarter and $3.9 billion in fiscal 2022. The company anticipates capital expenditures for fiscal 2023 in the band of $3.8 billion-$4 billion.

Shares of this Zacks Rank #3 (Hold) company have increased 4.2% in the past year against the industry’s decline of 7%.

3 Picks You Can’t Miss Out On

We have highlighted three better-ranked stocks, namely BJ's Wholesale Club BJ, Kroger KR and Performance Food Group PFGC.

BJ's Wholesale Club, which operates membership warehouse clubs, currently sports a Zacks Rank #1 (Strong Buy). BJ has an expected EPS growth rate of 9.3% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BJ's Wholesale Club’s current financial-year sales and EPS suggests growth of 15% and 10.8%, respectively, from the corresponding year-ago period’s levels. BJ has a trailing four-quarter earnings surprise of 16.5%, on average.

Kroger, a renowned grocery retailer, carries a Zacks Rank #2 (Buy) at present. The company has an expected EPS growth rate of 11.7% for three to five years.

The Zacks Consensus Estimate for Kroger’s current financial-year sales and EPS suggests growth of 7.8% and 9.8%, respectively, from the year-ago reported number. KR has a trailing four-quarter earnings surprise of 15.7%, on average.

Performance Food Group, which markets and distributes food and food-related products in the United States, carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Performance Food Group’s current financial-year sales and EPS suggests growth of 12.7% and 29.6%, respectively, from the corresponding year-ago period’s actuals. PFGC has a trailing four-quarter earnings surprise of 7.3%, on average.


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