Costco Wholesale Reports Fourth-Quarter Revenue Miss

By Juveria Tabassum

(Reuters) – Costco Wholesale missed market expectations for fourth-quarter revenue on Thursday, hampered by cautious consumer spending on pricier items at its membership-only stores and lower gasoline prices.

While ultra-low prices drive demand for groceries and kitchen staples, spending on furniture, home, and sporting goods has been inconsistent, affecting sales at Costco (NASDAQ:COST) warehouses.

“There’s definitely some signs that the consumer is being very choiceful in how they’re spending their dollars,” said Chief Financial Officer Gary Millerchip during a post-earnings call.

Customers are seeking more deals, particularly in the appliances and electronics categories, which have become increasingly promotional over time, Millerchip added.

Online shopping also boosts sales as consumers favor convenience and delivery options.

“Shoppers have not run out of steam but are redistributing their spend between various physical and online retailers,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

Despite efforts to enhance online sales, Costco’s ecommerce growth slowed to 18.9% from 20.7% in the previous quarter.

The retailer’s same-store sales were affected by lower gasoline prices, growing 5.4% in the period ending Sept. 1, down from a 6.6% rise in Q3.

Costco’s fourth-quarter revenue increased nearly 1% to $79.70 billion, missing analysts’ average estimate of $79.97 billion, as per LSEG data.

Nonetheless, net income of $5.29 per share exceeded estimates of $5.08, with gross margins improving by 40 basis points.

In July, Costco announced a $5 increase in its annual membership fee, raising it to $65 for “gold star” members and to $130 from $120 for executive members, effective Sept. 1.

Costco’s shares fell 1% in extended trading but have risen about 37% throughout the year.