Costco Q3 Earnings : Revenue Increases, EPS Beats Expectations

Costco (NASDAQ:COST) announced its Q3 2016 results on Wednesday, May 25. The company’s revenue increased 2.6% year-over-year (y-o-y) to $26.77 billion during the quarter, which missed the Reuters consensus estimate by $300 million. The company’s earnings of $1.24 per share were up 2 cents per share over Q3 2015 results.

Even though membership fees form a small part of the company’s total revenue, they witnessed 5.8% growth y-o-y this quarter. Costco generates low margins from its retail sales, and as such, hikes in membership fess can help offset those low margins in the near term.
In the third quarter, Costco posted flat comparable U.S. sales for the first time in six years. Low spending by high income consumers (Costco’s core customer base) contributed to this lower comp sales. Comparable sales – excluding the negative impacts from gas price deflation and foreign exchange fluctuations – were up 3%, below the average analyst estimate of 4.6%.

Out of the 32 additional stores added to Costco’s total in the past year, 13 stores are in international markets, as Costco continues to focus on its international expansion.

In the upcoming quarter, the analyst consensus calls for revenue to grow at 4.8% y-o-y to $37.5 billion.

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