Costco reported quarterly earnings that exceeded Wall Street’s expectations. Despite a decrease in sales of big-ticket items, the membership club saw an increase in shoppers purchasing groceries. This resulted in a rise in traffic to Costco’s stores, with a 5.2% increase worldwide and 5% in the U.S. However, the average transaction amount dropped by nearly 4% globally and 4.5% in the U.S. Costco’s net income for the fourth quarter rose to $2.2 billion, or $4.86 per share, compared to $1.87 billion, or $4.20 per share, last year.
Comparable sales for the company saw a 1.1% increase on a year-over-year basis, but only a 0.2% increase in the U.S. When excluding changes in gas prices, the metric rose by 3.8% overall and 3.1% in the U.S. Costco has experienced growth in recent years due to factors such as the rise of at-home cooking and millennials moving to suburban homes. Costco has gained more than 71 million paid household members, reflecting an 8% increase from the previous year.
Costco’s membership growth has also seen an increase in higher-tier members who opt for the Executive Membership, which costs $120 annually and comes with additional perks. These higher-tier members now account for over 45% of all paid memberships and approximately 73% of global sales.
While e-commerce sales declined by 0.8% compared to the previous year, sales of appliances increased by over 30%. Costco’s website also struggled to keep one-ounce gold bars in stock due to high demand. Groceries continue to be the driving force behind Costco’s sales, a trend observed across Walmart and Target as well.
To encourage customers to buy more items outside of the grocery department, Costco has introduced small-ticket items such as impulse-driven snacks. The retailer has also kept merchandise fresh with popular gaming systems and early Christmas items, which have sold well.
In the U.S., the majority of Costco’s clubs are located, and while sales trends have slowed, the company plans to open 10 new stores in the next three months. Investors anticipate a membership fee hike, although the timing remains uncertain. Costco’s stock has outperformed the S&P 500, rising about 21% this year.
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