Skip to content

Costco (COST) Q3 Earnings Preview: Membership Matters

Trade COST Stock Your Capital Is At Risk
Updated 25 May 2022

Key points:

  • Will Costco's membership model underpin earnings growth at a difficult time for retailers?
  • Analysts are expecting earnings at $3.04 per share on revenue of $51.34B
  • Costco's loyal customer base might give the company a leg up in times of inflation

In a hectic, unfortunate earnings week for retail giants, we’ve seen the impact that inflation and other headwinds are having on the supermarket industry. Higher inventory and freight costs, changing consumer spending habits and staffing issues are just a few of the issues illuminated by Walmert and Target in their earnings reports over the last few days. Now, it's the time for wholesale monolith Costco (NASDAQ: COST) to step up to the earnings mark, with investors paying close attention to how the company’s membership model might result in a different picture. 

new-recommended-broker-banner

Analysts are expecting an earnings rise of 11% to $3.04 per share, with revenue expected to climb 13% to $51.34B.

Read Also: Best Undervalued Stocks To Buy Right Now

Investors will want to see clear signs that the membership-based warehouse club is effectively handling mounting cost pressures whilst maintaining its loyal consumer base, something that might mean Costco is more comfortable moving towards revenue and earnings expectations. Any resurgence in COST shares would be a bounce back from a cliff-edge sell-off over the last few weeks.

Despite consumer spending remaining strong across Walmart and Target earnings, rising costs of goods and labor are weighing on bottom line breathing room. The company is also seeing a shift in spending choices, with consumers spending less on TV’s and luxury items as inflation takes hold.

As the majority of Costco’s profits come from its membership fee, surely the retailer will be the least affected by rising prices, and the most likely to keep its prices lower for its customers. Whilst the earnings release might point to a slowdown in discretionary purchases, Costco’s ability to retain loyal customers should play a strong part.