Costco Wholesale Surpasses Expectations in First Quarter

By Ananya Mariam Rajesh

(Reuters) – Costco Wholesale beat first-quarter revenue and profit expectations on Thursday, driven by its bulk and discounted offerings that appeal to budget-conscious American shoppers, thus contributing to early holiday-season sales growth.

The company's shares, having risen 51% so far this year, increased by nearly 1% in extended trading.

This membership-only retail chain, known for selling products in larger packs and offering bulk deals like bread and eggs for as low as $3, has attracted consumers shopping for holiday essentials, including home furnishings and jewelry.

The 2024 holiday shopping season is shorter, with only 26 days between Thanksgiving and Christmas. Consequently, retailers across the United States rolled out discounts and promotions as early as October to remain competitive and lure cautious customers.

Costco (NASDAQ:COST) initiated pre-Black Friday sales in early November to mitigate potential sales impacts from the late Thanksgiving weekend, which pushed into December.

It has offered steep discounts on products like an LG UltraGear Gaming Monitor for $179, $70 lower than its original price, and JBL headphones at a 30% discount, retailing at $69.99.

Brian Mulberry, client portfolio manager at Zacks Investment Management, noted, "It seems like you saw more than just bulk food sales growing. So it looks like there was a little bit of an uptick in other goods, not necessarily big-ticket discretionary items… but you're seeing some sales growth in some different aisles of the store."

In contrast, Walmart (NYSE:WMT), Costco's larger competitor, which is also offering more discounts and promotions, raised its annual sales and profit forecast in November for the third time this year, indicating strong consumer spending.

Costco's first-quarter revenue increased by 7.5% to $62.15 billion, surpassing analysts' estimate of $62.08 billion, according to data from LSEG.

The company's profit reached $4.04 per share, exceeding the estimated $3.79.

Additionally, the recent increase in its annual membership fee to $65 for Gold Star members and $130 for Executive members led to a 7.7% rise in earnings from fees, totaling $1.17 billion in the quarter.