4 Costco Analysts On Q1 Earnings Miss: 'Consumables Strength And Improving Membership'

Zinger Key Points
  • "U.S and global traffic remain consistently positive," says one analyst.
  • Costco reposted a slowdown in same-store sales growth in the fiscal first quarter.

Costco Wholesale Corporation COST shares were trading higher after the company reported a mixed start to its new fiscal year on Thursday afternoon.

Costco reported fiscal first-quarter adjusted EPS of $3.07 on revenue of $53.44 billion. Both numbers missed consensus analyst estimates of $3.11 and $58.36 billion, respectively. Revenue was up 8.1% from a year ago.

Costco reported gross margin dropped 0.45% in the quarter.

Same-store sales were up 6.6%, beating consensus estimates of 6.4%.

Same-store sales growth declined significantly from the 13.7% level Costco reported in the fiscal fourth quarter. In addition, online sales dropped 3.7% in the quarter.

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Strong Membership Trends: Bank of America analyst Robert Ohmes said Costco's solid membership growth is offsetting softening big ticket trends.

"While big ticket sales slowed in November and we would expect these trends to remain soft given the current economic backdrop, comps should see continued support from consumables strength and improving membership trends," Ohmes wrote.

BMO Capital Markets analyst Kelly Bania said long-term investors should continue to accumulate Costco shares.

"While big-ticket discretionary weakness weighted on November comps and could remain a risk, we recommend using weakness in COST shares thru this macro cycle to build positions in this best-in-class retailer," Bania wrote.

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Impressive Execution: Raymond James analyst Bobby Griffin said Costco's near-term outlook may be choppy given its difficult comps, but his long-term bullish thesis remains intact.

"In particular, U.S and global traffic remain consistently positive and total members continue to grow nicely on a y/y basis (even when factoring in new openings)," Griffin wrote.

Telsey Advisory Group analyst Joseph Feldman said Costco should continue to gain market share and generate high membership renewal rates.

"We believe Costco is executing well in this challenging operating environment, as it helps its members save money on basics while enjoying great value on discretionary products," Feldman wrote.

Ratings And Price Targets:

  • Bank of America has a Buy rating and lowered the price objective from $600 to $595. 
  • BMO Capital Markets has an Outperform rating and lowered the price target from $600 to $555.
  • Raymond James has an Outperform rating and $570 target.
  • Telsey Advisory Group has an Outperform rating and lowered the price target from $590 to $580.

 

Posted In: Bank of AmericaBMO Capital MarketsBobby GriffinJoseph FeldmanKelly BaniaRaymond JamesretailRobert OhmesTelsey Advisory GroupAnalyst ColorEarningsNewsPrice TargetReiterationTop StoriesAnalyst Ratings