Cost Cutting (COST Earnings)
Following the market's close, Costco (COST), a membership-based warehouse retailer, is set to announce its 4Q23 results. The earnings call is slated for 5:00 p.m ET, with the results anticipated to be out by 4:15 p.m.
For Q4, the FactSet consensus projects an EPS of $4.79 and revenues of $77.7 billion.
A crucial metric for COST is comparable sales. But, since these sales figures are released monthly, there's little uncertainty about the quarter's performance.
COMPS
Excluding the effects of gasoline and FX, the comps for August stood at +4.1%, following +5.0% in July and +3.0% in June. There's been a noticeable deceleration in both total and comparable sales growth lately, attributed to reduced discretionary spending. The demand for high-end items like appliances, jewelry, electronics, and home decor has been subdued, impacting the revenue for the past few quarters. To provide perspective, in August 2022, COST reported a robust adjusted comps of +10.1%.
TICKET SIZE
In the third quarter, the average ticket size shrank by 4.2%, mirroring the tepid demand for pricier items. Moreover, sales in the e-commerce sector for high-value discretionary items plummeted by 20%, with the overall e-commerce sales down by 10% in Q3. The e-commerce sector reported a further 2.5% drop this past August, hinting at stagnant demand in these categories.
MARKET SHARE
On the brighter side, COST has consistently gained market share in the food and daily essentials segment, evidenced by its steady customer traffic growth. In Q3, customer traffic surged by 4.8%. Additionally, COST's membership renewal rates have been at a record high of 92.6% in Q3. Membership growth also continues, with a 7% rise to 69.1 million in Q3, signifying the perceived value of bulk food purchases by consumers.
Another positive is the recent uptick in gasoline prices. COST members benefit from gasoline discounts, and when these prices climb, COST usually witnesses increased store footfall.
TECHS:
COST's shares have shown resilience, declining only 1% since September 15. This trend indicates that investors anticipate another robust quarter from the warehouse retail giant.
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