You Cannot Not Applaud Costco

More than a week ago, Costco Wholesale Corporation COST reported very Costco-like quarterly results, and analysts and shareholders didn't expect anything less. The latest results confirm that the retailer is doing a great job in dealing with supply chain disruptions and inflationary issues.

Solid First-Quarter Fiscal 2022 Results

For the quarter ended on November 21^st, total revenue increased 16.5% YoY to $50.363 billion, ahead of FactSet estimates of $49.652 billion. Earnings also topped estimates of $2.62 per share as they grew nearly 14% YoY to $2.98. The results include a tax benefit of from stock-based compensation as well as a write-off of IT-related assets that amounted to $0.21 and $0.20 per share, respectively.

Over the quarter, adjusted comparable sales grew 9.9% in the United States, 8.3% in Canada and 10.9% in the rest of the international segment. E-commerce grew 13.3%. These figures exclude the impact from changes in gasoline prices and foreign exchange.

Metrics

Shipping frequency in warehouses increased 6.8% globally and 5.9% in the United States, with the average transaction also increasing at both locations, 7.7% and 8.5%, respectively.

The majority of profits comes from revenue from membership fees which increased about 9.9% YoY to $946 million, beating estimates of $929.6 million. Costco ended its quarter with 113.1 million total cardholders increasing its base from last quarter's 111.6 million. As for paid executive members, there were 26.5 million at the end of the quarter, which is an increase of 836,000 compared to the previous quarter.

In the United States and Canada, renewal rates were 91.6% with the worldwide renewal rate right behind at 89%, both increasing 0.3 of a percentage point. Auto-renewals continue to drive strong retention rates, as well as the increased penetration of executive members, who tend to renew at a higher rate than non-exec members.

Plenty of Room to Run

Over the quarter, it had 8 net openings with plans of net 19 additions until the end of the year. Its popularity is giving Costco plenty of room to run.

Outlook

Over the past eight years, Costco has paid out a special cash dividend to its shareholders four times. The last time Costco issued one was November 2020, and the strength of the company's cash flow from operations shows it is capable of rewarding its shareholders once again. Historically, Costco increases the cost of a membership every half of a decade, and next summer will mark five years since the last increase. With strong loyalty rates, Costco also likely has the power to increase its membership fees and this income equates to pure profit.

You Cannot Not Admire This Way of Doing Business

Costco has always been the last one to raise prices and the first to lower them, and CFO Richard Galanti showed this will continue being the case. Considering management's best efforts to limit passing through inflationary pressures on to its customers, Galanti has every right to be pleased. Besides achieving a satisfactory gross margin in such a challenging environment, the company's inventory position and the conducted work to mitigate cost and price increases that ended up even higher than the company itself expected are worthy of praise.

It Pays Off Doing Things Right

Overall, Costco reported good results. It continued to add new members to its clubs, while retaining most of its existing customers, with sales and profits significantly up as a result.

With 79 percent of import containers being late by an average of 51 days due to supply disruptions that are being felt across the industry, Costco has engaged in forward to stay ahead. All in all, it did a great job in a challenging environment, and that is exactly what investors expected.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com

The post You Cannot Not Applaud Costco appeared first on IAM Newswire.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.

Image Sourced from Pixabay