TLDR
- Costco reported 8.2% sales growth in fiscal Q1 to $65.98 billion, beating analyst expectations of $67.1 billion
- Same-store sales increased 6.4% for the quarter and 6.9% in November, exceeding the expected 5.8% growth
- E-commerce showed strong performance with digitally enabled comparable sales jumping 20.5% in the quarter
- November net sales reached $23.6 billion with foot traffic up 3.8% worldwide and average transaction up 3%
- Despite beating forecasts, Costco stock dropped 3.36% to $891.23 on Thursday
Costco stock took a hit Thursday morning, dropping over 3% even after delivering sales numbers that topped Wall Street’s expectations. The warehouse retailer reported fiscal first-quarter sales of $65.98 billion, handily beating the analyst forecast of $67.1 billion.
Costco Wholesale Corporation, COST
The stock slid to $891.23, down $31.03 or 3.36% by mid-morning trading. This puzzling reaction comes despite the company posting 8.2% sales growth for the quarter ended November 23.
Same-store sales told an even better story. The metric climbed 6.4% for the quarter, outpacing analyst expectations of 5.8% growth. In November alone, same-store sales accelerated to 6.9%, up from October’s 6.6% gain.
November sales reached $23.6 billion, marking an 8.1% year-over-year increase. October had seen slightly stronger growth at 8.6%, but the November numbers still reflect healthy momentum heading into the holiday season.
Digital Push Pays Off
The real standout? E-commerce growth. Digitally enabled comparable sales surged 20.5% during the quarter. This marks a turning point for Costco, which historically lagged behind competitors in online retail.
The warehouse club has been playing catch-up in the digital space for years. These numbers suggest that strategy is finally gaining traction with shoppers who want the Costco experience without the warehouse trip.
Food traffic patterns remained solid in November. Comparable foot traffic increased 3.8% worldwide. The average transaction ticked up 3%, showing customers weren’t just visiting more often but spending more per trip.
Top-performing categories included candy, food, sundries, meats, bakery, jewelry, and health and beauty products. Director of finance and investor relations Andrew Yoon highlighted these categories in the monthly report.
Gas Station Effect
Costco’s gas stations play a unique role in driving traffic. Members flock to the pumps for below-market prices and potential 5% cash back with the Costco credit card.
When you strip out gasoline sales from the same-store sales numbers, things look slightly different. The figure dropped 0.5% for November and 0.1% for the full quarter. For the 12-week period, it remained flat.
Gas sales provided a minor boost in November but didn’t dramatically skew the overall picture. The core retail business showed strength on its own merits.
The quarterly sales figure of $65.98 billion excludes membership fee revenue. Those numbers will come out when Costco reports full earnings on December 11.
Valuation Questions
At 50 times earnings, Costco trades at a premium to most retailers. The stock has gained just 1% year-to-date while the S&P 500 climbed 16%.
The market cap stands at $409 billion. The 52-week range spans from $871.71 to $1,078.23.
Black Friday weekend sales didn’t make it into the quarterly cutoff of November 23. Those numbers showed up in the November monthly report with its November 30 cutoff date.
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