Wednesday, July 24, 2024
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Costco Wholesale exceeded third-quarter revenue expectations on Thursday, as budget-conscious consumers increasingly turned to the retailer’s warehouses for affordable discretionary items and groceries. The membership-only giant reported robust sales driven by a variety of fresh foods and bakery items, including new additions like lemon blueberry loaf, morning buns, and chocolate chip cookies. With the cost of living remaining high, more consumers are choosing to prepare meals at home, boosting Costco’s food sales.

Chief Financial Officer Gary Millerchip highlighted that as inflation pressures eased, there was a noticeable increase in discretionary spending. “Members are returning to purchasing more discretionary items, with growth led by toys, furnishing, lawn and garden supplies, as well as health and beauty aids products,” Millerchip said during a post-earnings call.

Costco’s performance contrasts with mixed results from other major retailers. Earlier this month, Walmart reported better-than-expected quarterly results and optimistic annual forecasts, buoyed by consistent demand for affordable groceries and an anticipated uptick in non-essential purchases. On the other hand, Target experienced a challenging quarter with lukewarm consumer spending.

For the quarter ending May 12, Costco’s total revenue reached $58.52 billion, surpassing the analysts’ average estimate of $58.07 billion according to LSEG data. The company also posted a profit of $3.78 per share, exceeding the expected $3.70 per share. “In a world where most retailers have suffered from some sort of volatility or pocket of softness, Costco is a rare beacon of consistency,” commented Scot Ciccarelli, an analyst at Truist Securities.

Costco witnessed an 8.9% year-over-year increase in store visits in the first quarter, outperforming Walmart and Target, which saw increases of 3.9% and 3.5% respectively, as reported by Placer.ai. The retailer’s total comparable sales rose 6.5% on an adjusted basis, a notable improvement from the 3.5% rise the previous year. Additionally, Costco’s e-commerce comparable sales surged by 20.7%, driven by strong demand for gold and silver bullion, gift cards, and appliances.

Costco’s ability to attract consumers seeking value in both food and non-food categories underscores its resilience in a challenging economic environment. As inflation levels off and consumer confidence begins to stabilize, Costco appears well-positioned to maintain its momentum and continue delivering strong financial results.

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