Costco Wholesale (NASDAQ: COST) beat Wall Street’s revenue and profit estimates for its fiscal fourth quarter, but the shares barely moved after the report.
Investors focused instead on a one-off tariff refund that inflated earnings and on membership income growing more slowly for a third consecutive quarter.
The warehouse retailer said after Thursday’s US market close that revenue for the quarter reached $95.72bn, ahead of consensus estimates of $94.86bn, while diluted earnings per share came in at $6.75, above analyst forecasts of $6.55 and up from $5.87 a year earlier. Comparable sales rose 9.4% on a reported basis, or 6.7% once petrol prices and currency effects are stripped out.
The headline beat came with a catch: Costco said $0.15 of that per-share profit was a non-recurring benefit from tariff refunds received under the IEEPA programme, net of some reinvestment into member pricing.
Membership income, the subscription fee that underpins Costco’s model, told a more cautious story. It rose 7.3% year-on-year to around $1.85bn, the third consecutive quarter of decelerating growth in that line. Total paid membership reached 84.1 million, up 3.8% year-on-year but below consensus of around 85 million, extending an eighth straight quarter of slowing paid-membership growth. There were pockets of improvement: the worldwide renewal rate ticked up to 89.8% from 89.7%, the US and Canada renewal rate rose to 92.3% from 92.2%, and paid executive members hit a record 42.3 million, up 9.4%.
Renewal rates showed improvements again this quarter, with the increasing executive penetration likely to help improve those rates in the future.
Ron Vachris, Costco Wholesale
Costco shares had already closed Thursday’s regular session down 0.91% at $896.48, from $904.70, before the results were published after the bell. In extended trading, shares were little changed, up less than a quarter of a percent, and remain roughly 18% below the closing high set in May.
CNBC’s Investing Club, which rates the stock a hold-equivalent, cut its price target to $1,050 from $1,100, citing valuation compression pending further improvement in membership trends. MarketWatch reported that analysts, including Zacks’ Bryan Hayes, were cautious because of the tariff refund’s contribution to profit and the ongoing membership slowdown.