Costco stock slips as earnings fall short of expectations

Eric Thayer

Costco Wholesale Corporation (NASDAQ:COST) uncharacteristically missed earnings estimates on Thursday.

For its fiscal first quarter, the Washington-based retailer reported $3.10 in earnings per share on $53.44B in revenue. Analysts had anticipated $3.12 and $54.68B, respectively. To be sure, certain charges related to shipping and stock-based compensation make for an imperfect EPS comparison.

Additionally, comparable sales growth of 6.6% came up just short of the 6.87% consensus and a 6.5% jump in US comparable sales ex-gas also came in just below the 6.58% expectation.

The miss on revenue is the first miss for the company in 3 years. Meanwhile, the disappointing report on EPS is the first since February 2021.

Costco (COST) shares fell 1.75% shortly after the earnings results were announced.

Read more on downbeat sales trends at the retail giant as of late.

Comments

[Spend A Buck]

I don't understand the Costco cult. We were members for a year but did not renew. I can find similar deals on Amazon, and I don't have to deal with the madness of the Costco parking lot or crowds.

The stock is extremely overvalued.

For these reasons, I do not own COST.

[Seeking more alpha than you]

@Spend A Buck my family and I love Costco. We are there every week.

[Former 80s Rockstar]

@Spend A Buck my brother owns a catering business and he can often pick up items cheaper at Costco than at wholesale. Also, many small neighborhood mom and pop convenience stores use Costco to purchase items for resale in their stores. I am no longer a Costco member, but when I was, I once witnessed a man buy about 200 cartons of cigarettes and when I joked that that was an awful lot of cigarettes to smoke, he explained to me he had a convenience store and that's where he got the cigarettes. I only present these examples as outside the traditional realm of a family shopping at Costco to buy in bulk.

[TunnelUnderTokyo]

@Spend A Buck Costco is a lifesaver for a bigger family like ours, you'll quickly run out of money buying from a traditional grocer.

[Chancer]

Does the writer not know that Costco hikes membership fees every single year- I believe about $10.
If their sales increases are dropping, an excessive membership fee increase might drive shoppers away.
I have reduced purchases at Costco a lot since 2020 pandemic, when Costco raised many prices. I can buy many items cheaper at Walmart and Amazon with greater convenience.
Best value at Costco is for gas, although I have reduced gas purchases also.

[User 56355736]

@Chancer Actually they historically raise membership fees by $5 to $10 every 5 to 6 years. I don't think they would keep many members if it was an annual $10 increase. I've just posted an article with some comments from the CFO on this topic.

[Seeking more alpha than you]

@Chancer I’ve been a member for a while and haven’t seen a $10 per year increase.

[rubble]

1.2 B on 53B revs? So. Jump on the bandwagon and beat it down so I can buy more. The consumer is still in good, if not great shape and when inflation and lack of wage gain hurts- people still flock to Costco.

[racerkeith]

Analyst's estimates are as reliable as weathermen's predictions.... but at least they create buying opportunities when the scared $$$ dumps on the down swings.

[pman62]

this still looks overpriced as fuk

[OverTheHorizon]

Second Covid freezer full & garage can’t hold any more 5 LB plastic jars of peanut butter.

[userisnotknown]

Loyal Costco, the canned sardines are amazing :)

[Heavy Fuel]

If Costco is slipping,what does that tell you about the "Economy".....?

[grharmon]

@Heavy Fuel it’s all trumps fault, I mean Biden’s fault

[L. Mannheim]

@Heavy Fuel As both a member and a holder, we're doing a few things in reaction to high prices.
1. We fill up at Costo and visit the location a little less often.
2. Buy less (small quanity) at the local grocery store in favor of (more quantity) Costco. - big fan of using a freezer.
3. But, even with above, still buy less at Costco - those 2-3 extras (sometimes non-food, or non-necessary food), we used to get are not coming home with us anymore.
4. We buy less expensive alternatives within Costco, like hamburger instead of steak for example. Pumpkin Pie ($5.99) is still a no-brainer. This is why I'm not shedding pounds very much.

[Heavy Fuel]

@zingerizer I agree. We don't shop as much as we use to. We now go once a month,maybe twice. Our local store is always packed! But with a store like Costco and numbers slipping,that tells me something is wrong.

[olde1two]

Everyone is hurting and even COST.
They'll make some slight changes and they'll be ok in the long run.
Energy cost are hurting everyone and everything, but Biden and his misfit morons don't understand at all. It causes everything to go up.

[usedcarguy]

@olde1two They understand it, but it puts them in an untenable situation with their political base who does not. It's how the clown can get up on stage and say "no more drilling" while whining that the O&G companies aren't doing their part to produce enough.

What people should take from that is that O&G is a far better place to be right now and the foreseeable future than COST as oil demand falls much less in a recession than consumer goods. No matter how much we hope he doesn't run the economy into the ground, we're already on the trajectory and there is no stopping it.

[SPDY84]

Only a slight $1.2B miss?... lmao. Costco is a great company, but this valuation is absurd. That H&S on the weekly is definitely going to play out if we go into a recession.

[Big Lew]

@SPDY84
Miss ?? They “ missed” what analysts guessed as their numbers. If you look at analysts records of estimating earnings , you’ll find they are wrong 80% of the time. Costco revenues we’re actually up 6.6% in this case. Also, 90% of these analysts that everyone seems to listen to can’t beat the S&P 500 !

[Chicagomary2]

@Big Lew actually my broker had a whole list of analysts and although most reduced their one year price targets, I didn't see even ONE rating lower than a "buy' probably why sp is UP today

[Former 80s Rockstar]

@Big Lew Agreed. The weather folks on TV are more accurate than the market analysts. The difference is everybody doesn't freak out when the weather forecasters say a light passing shower is possible and it rains half of the afternoon.

[L. Mannheim]

I see it as more about the overall change in the economy than Costco, but it's been richly valued and vulnerable to a downturn.

[wboz]

@zingerizer agree. It's business will hold up okay, but there is gonna be negatives and the valuation is too high to easily forgive that. I sold cost after many years because of this. I hope to buy it again in future. Buy and hold is, on the other hand, probably better for this stock than most and definitely an acceptable strategy.

[Finding Your Retirement]

even the rich people shopping at costco are starting to feel the biden squeeze

[6824615]

@Finding Your Retirement

Tariffs have caused more food inflation than during Biden’s tenure or at least the stuff I buy.

Inflation overall was tepid, 2017 - 2020, due to rent and transportation costs actually decreased (40% of CPI) due to very slow demand due to, IMO, tariffs.

[wboz]

@Finding Your Retirement the Costco near me is a lot of Mercedes and Audis etc, so you got it there!

The unnecessary extra stimulus was approved by Congress spanning two prez terms tho .. Blame em all but not just one.

[Big Lew]

@6824615
I guess you believe the governments 8% inflation rate. Now that’s an average, so 50% of items must be below that rate. Try naming one that has gone up less than 8% and then all the ones that have gone up more than 8%. I bet that number would be higher than 50%.

[Kansas King]

I honestly don't get much of a sense of value in a lot of what I buy at Costco anymore. Yeah, there are some occasional diamonds in the rough but it's not like it used to be.

[Seeking more alpha than you]

@Kansas King I love Costco. It seems to be getting better and better.

[JDubsFL]

@Kansas King Go visit your local grocery store chain (Publix, Aldi's, Kroger, etc.)...the experience will likely re-affirm your faith in Costco. There are fewer diamonds *everywhere*, and even ordinary staples are either out of stock or overpriced...

Costco, even as a *premium* wholesaler, is far better equipped to weather the coming storm than many chains that offer no value to cash-strapped Americans. If anything, no one else can beat the $4.99 rotisserie chicken.

[thehip]

@JDubsFL 100% true on the chicken but I agree KK. I go to Kroger more as Costco is not saving me much, other than on a few select items.

[dogswithoutfleas]

They just have a slight inventory issue (ie the higher margin things aren’t selling like they used to in part because that’s always a guess as to what consumer wants. They will squeeze suppliers and raise prices and they will be fine. Recession prof items will continue to keep them going well but may need to trim costs just like every other retailer.

[Valuestocks007]

Time to buy some more COSTCO!

[Chicagomary2]

@Valuestocks007 I sold a few this am; bought back $6.30/share cheaper. rinse and repeat. :)

[Valuestocks007]

@Chicagomary2 yeah i have owned it for over a decade.. not smart enough to trade.

[Chicagomary2]

@Valuestocks007 don't fret! I've been a member for YEARS, but only an owner of shares for about two!

[jcngu72]

Hoping for an overreaction so I can add to my position. Business still solid and not sure if recession will slow sales. I know I'll continue to spend my money there. Also, membership fee increase likely to come.

[shoe4567]

Give me a break! Something’s are beyond their control! Every time I go there ,they are busy.

[6824615]

@shoe4567

I agree busy most times I’m there. However, there are definitely fewer food items, mostly packaged entrees, on sale for last 6 months. Can’t really explain it but my monthly purchases are 30% less in last 3 months over prior periods. Awareness perhaps. Won’t buy salmon at current price. Went up 30% in 2018-19 and another 20% 2021-22 ($7.99 (2017) - $11.99 now p/lbs).

[Valuestocks007]

@shoe4567 Its insanely crowded at mine.. so hard to find a spot to park

[Chicagomary2]

@6824615 yes, but salmon is good for our brains; just eat it a bit less often. They do also sell canned salmon. We need to check out older relatives recipe books; families used to eat a lot more canned tuna and salmon casseroles 30 years ago.