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4-Traders Homepage  >  Equities  >  Nasdaq  >  Costco Wholesale Corporation    COST

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Costco Wholesale : Shrinking margins cloud Costco's profit beat, shares fall

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10/06/2017 | 12:31am CEST
FILE PHOTO: A Costco truck makes a delivery to a Costco store in Carlsbad, California

Costco Wholesale Corp's (>> Costco Wholesale Corporation) quarterly profit scraped past estimates, helped by a hike in membership fees, but a fall in gross margins fueled concerns of an intensifying grocer price war, sending shares down 3.6 percent in after-market trading.

Costco Wholesale Corp's (>> Costco Wholesale Corporation) quarterly profit scraped past estimates, helped by a hike in membership fees, but a fall in gross margins fueled concerns of an intensifying grocer price war, sending shares down 3.6 percent in after-market trading.

Investors are wary that Costco's business model, which mainly generates revenue through a niche membership club, faces increased competition from online giant Amazon.com Inc (>> Amazon.com), which has begun to shake up the grocery space with its acquisition of Whole Foods.

Gross margins in the fourth quarter were lower year-over-year by 15 basis points, as the retailer spends to drive sales and member loyalty, Costco said on a post-earnings conference call on Thursday.

"We believe near-term sentiment and fear of the long-term impact of Amazon on Costco's business could continue to create an overhang on COST shares and limit valuation upside," BMO Capital Markets analysts said in a pre-earnings client note.

Costco's shares have fallen 7.2 percent since the Amazon-Whole Foods deal was announced in June.

MEMBERSHIP FEE HIKE

Costco implemented its annual membership fee increase by $5-$60 for Goldstar and business members, and by $10-$120 for executive memberships in the quarter.

Membership fees, which accounted for about 72 percent of Costco's operating income in 2016, rose 13 percent in the 17-week fourth quarter ended Sept. 3.

Excluding the impact of fuel and currency fluctuations, total comp sales rose 5.7 percent, while analysts at research firm Consensus Metrix expected an increase of 5.1 percent.

Costco's U.S. comp sales rose 5.8 percent in the quarter.

Net income attributable to Costco rose to $919 million, or $2.08 per share, from $779 million, or $1.77 per share.

Total revenue rose 15.7 percent to $42.30 billion.

Analysts on average had estimated earnings of $2.02 per share and revenue of $41.55 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Karina Dsouza and Vibhuti Sharma in Bengaluru; Editing by Martina D'Couto)

Stocks treated in this article : Costco Wholesale Corporation, Amazon.com
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Financials ($)
Sales 2018 137 B
EBIT 2018 4 452 M
Net income 2018 2 813 M
Debt 2018 1 339 M
Yield 2018 1,30%
P/E ratio 2018 24,70
P/E ratio 2019 22,48
EV / Sales 2018 0,52x
EV / Sales 2019 0,48x
Capitalization 69 244 M
Chart COSTCO WHOLESALE CORPORATI
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Costco Wholesale Corporati Technical Analysis Chart | COST | US22160K1051 | 4-Traders
Technical analysis trends COSTCO WHOLESALE CORPORATI
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 178 $
Spread / Average Target 13%
EPS Revisions
Managers
NameTitle
Walter Craig Jelinek President, Chief Executive Officer & Director
Hamilton Evans James Chairman
Roger A. Campbell Senior Vice President- International Operations
Richard A. Galanti CFO, Director & Executive Vice President
Paul G. Moulton Chief Information Officer & Executive VP
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