Costco's quarterly results indicate the retailer is thriving despite high inflation

Published Thu, Sep 22 20227:26 PM EDTUpdated Thu, Sep 22 20227:29 PM EDT

Costco (COST) reported a solid fiscal fourth quarter after the closing bell Thursday. Total revenue, which includes revenues from membership fees, increased 15% year over year to $72.09 billion, a slight beat compared to the consensus estimate of $72.04 billion. Earnings per share grew nearly 12% year over year to $4.20, beating estimates of $4.17. Over the full 16-week period, comparable sales in the United States increased 15.8% or 9.6% on an adjusted basis, which excludes the impact of gasoline prices and foreign exchange. In Canada, comparable sales increased 13.4% or 13.7% on an adjusted basis, while for the rest of international, comps increased 2.9% or 11.3% on an adjusted basis. E-commerce comparable sales increased 7.1% or 8.4% on an adjusted basis. For the total company, comparable sales increased 7.1% or 8.4% on an adjusted basis. Bottom line Costco shares were trading lower after-hours in reaction to the slight quarterly beats, but that's typical of how Costco trades when it reports earnings. Costco doesn't provide guidance but it does report its comparable sales on a monthly basis, Due to that monthly sales reporting structure, a lot of the good news gets priced-in ahead of the quarter. We continue to view Costco as a consistent, high-quality retailer with a fantastic business model that helps them to succeed in any economic environment. Inflationary, expansionary, or a recession, shoppers will always seek out the quality products at value prices Costco offers its customers. The stock may not be cheap by any measure, but we believe the premium is justified because of its dependable earnings growth. We continue to believe weakness in shares represents a long-term buying opportunity. Membership stats Revenue from membership fees is a closely followed metric because it is subscription based and is where Costco earns the majority of its profits. Membership fees increased 7.5% year over year to $1.33 billion, in-line with estimates of $1.321 billion. Foreign exchange had a $29.8 million negative impact. Costco ended its quarter with 118.9 million cardholders, an increase from 116.6 million total cardholders last quarter. Paid executive members ended the quarter at 29.1 million, up from 27.9 million last quarter. Renewal rates in the U.S. and Canada were 92.6%, a new all-time high. That's up 0.3% from last quarter. The worldwide renewal rate was 90.4, up 0.4% from last quarter. Margins Merchandise gross margins on a reported ba