Costco Wholesale Corp. (COST, Financial) released its fiscal second-quarter 2021 results after the closing bell on March. 4. The company posted mixed results.
Costco's shares dropped 0.09% in after-hours trading to $318.75 per share following the earnings announcement.
A rundown of the quarter
The bulk discount store operator posted net income of $951 million, or $2.14 per share, up from net income of $931 million, or $2.10 per share, for the year-ago quarter. Analysts had predicted earnings per share of $2.45.
Revenue (including net sales and membership fees) of $44.77 billion was up 14.6% on a year-over-year basis and was also ahead of analysts' expectations of $43.8 billion.
Comparable store sales were up 13% in the reported quarter worldwide. While the number of transactions improved during the quarter (up 1%), the average transaction amount jumped 11.9% as compared to the same period last year due to customers taking larger shopping trips.
Operating income came in at $1.34 billion, which was higher than the $1.28 billion reported last year. The SG&A expense was 9.89% of sales as compared with 9.78% of sales reported the year before.
The company incurred incremental Coronavirus-related expenses to the tune of $246 million (pretax), or 41 cents per diluted share, in the form of additional wages and sanitation in the first two quarters. Having increased the starting minimum wage from to $16 per hour, the company said its upcoming earnings will be adversely impacted, as it plans to pass these costs along to shareholders.
At quarter-end, the company had cash and cash equivalents of $8.64 billion and long-term debt (barring current maturities) of $7.52 billion.
Costco runs a total of 804 warehouses, 558 of which are in the U.S. During the quarter, the company did not launch any new stores.
Digital sales and subscriber growth
As a result of the pandemic, customers often refrained from going to the physical stores, which is why digital traffic gained momentum during the quarter. E-commerce comparable sales jumped 75.8% in the reported quarter as more customers visited the app and website.
Membership renewal rates for the quarter were a solid 88.5%. While paid members increased by 1.8 million, membership fee income grew by roughly $65 million during the quarter.
Disclosure: I do not hold any positions in the stocks mentioned.
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