Costco Wholesale (COST) stock faced a decline despite surpassing revenue and earnings expectations for its fiscal 2024 third quarter. The company maintained its current membership fees, leading to a mixed reaction in the market.
During the 12-week period ending May 12, Costco reported a 9.1% year-over-year increase in revenue, reaching $58.5 billion. Comparable store sales rose by 6.5% excluding the impact of gasoline prices and foreign exchange fluctuations. E-commerce sales saw a significant surge of 21%, driven by strong demand for gold bars and silver coins. The company’s earnings per share (EPS) also saw a notable increase of 29% compared to the previous year, amounting to $3.78.
The company’s performance exceeded analysts’ expectations, with revenue and earnings surpassing anticipated figures. Despite the positive results, Costco chose to keep its membership fees unchanged. The decision sparked discussions about a potential fee increase, with Costco’s CFO mentioning the consideration of factors like high inflation and economic risks before making any adjustments.
Furthermore, Costco addressed concerns regarding the pricing of its popular $1.50 hot dogs, reassuring investors that the price would remain stable. While the company had restricted non-member access earlier in the year, it confirmed during the earnings call that the price point would not be altered.
Analysts’ outlook on Costco stock remains positive, with a consensus target price of $805.82, indicating a potential 1% upside. The majority recommendation from analysts is to Buy the stock, with financial services firm UBS notably bullish on Costco, giving it a Buy rating and setting a target price of $940.
In conclusion, Costco’s recent earnings report showcased strong performance, but the decision to maintain membership fees created uncertainty in the market. Analysts continue to view Costco favorably, projecting potential growth for the retail giant in the future.
