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Costco Set to Shine: Analysts Predict Impressive Q1 Growth Fueled by E-commerce and Global Expansion

Lukas Schmidt
04:24am, Thursday, May 30, 2024
Costco Set to Shine: Analysts Predict Impressive Q1 Growth Fueled by E-commerce and Global Expansion
Photo by Grant Beirute on Unsplash

As the curtain rises on the financial theater of Costco (NASDAQ: COST), all eyes are on yet another performance of fiscal growth. The wholesale juggernaut is set on Thursday to announce its first-quarter earnings, and with consumers continually seeking value, the company appears poised for another commendable act.

The retail narrative is brimming with optimism, bolstered by increased foot traffic year-over-year, surpassing arch-rivals like Sam’s Club (NYSE: WMT) and BJ's Wholesale Club (NYSE: BJ). Analysts anticipate Costco’s net sales to touch an impressive $57.98 billion, marking an 8.07% rise compared to the previous year. Moreover, projections for adjusted earnings stand at $3.70 per share, an 8% increase, underscoring the company's robust earnings power.

Costco’s same-store sales are projected to experience a 5.93% uptick from last year, buoyed particularly by its flourishing international operations, which are expected to surge by 7.46%. The Canadian segment is also forecasted to blossom with a 6.96% growth, while the U.S. sector anticipates a respectable 5.51% rise.

The digital domain is expected to shine brightly too. E-commerce sales, reflecting an anticipated 11.5% year-over-year jump, hint at a growing appetite for online shopping. In the previous quarter, digital sales had already showcased a vigorous 18% year-over-year increase, propelled by demand for various items, including luxurious gold bars and essential appliances, as highlighted by CFO Richard Galanti during the earnings call.

Another crucial revenue driver, the membership fees, is forecasted to ascend to $1.53 billion, up from $1.51 billion the previous year. With the standard Costco Gold Star membership priced at $60 annually and the Executive Membership at $120, there were speculations last year about a potential fee hike, although such predictions are yet to materialize.

Investors flaunting Costco shares have relished a 22% year-to-date appreciation, notably outpacing the S&P 500’s (INDEXSP: %5EGSPC) approximate 11% gain. Oppenheimer analyst Rupesh Parikh elucidates that the company’s global unit growth and competitive edge justify its premium valuation, with a scope for unlocking further shareholder value through diversified revenue avenues.

Adding another layer of intrigue, JP Morgan analyst Christopher Horvers emphasizes Costco's consistent market share expansion, driven by its appeal to higher-income demographics. He also anticipates that the fluctuations in gasoline prices could provide a 70 basis point lift year-over-year, owing to inflation and an average selling price elevation of about 5% from April 2023.

Wall Street is particularly keen on dissecting performance within non-food segments, such as the jewelry department, as well as staples like fresh meat and produce, against the backdrop of consumers hunting for grocery value. Recent data indicated a 1.1% annual increase in grocery prices as of April, albeit a 0.2% decline from March.

To sum up, here are the consensus expectations for Costco’s fiscal first-quarter compared to the previous year:

  • Net sales: $57.98 billion, up from $53.65 billion
  • Adjusted EPS: $3.70, up from $3.43
  • Same-store sales growth: 5.93%, up from 3.5%
  • U.S. same-store sales growth: 5.51%, up from 1.8%
  • Canada same-store sales growth: 6.96%, slightly down from 7.4%
  • Other international: 7.46%, compared to 8.4%
  • E-commerce growth: 11.5%, bouncing back from a 9% decline
  • Membership fees: $1.53 billion, from $1.51 billion

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Lukas Schmidt

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