Costco Wholesale Corp. (COST, Financial) released its fiscal third-quarter 2021 results after the closing bell on May 27.
Costco's shares dropped 0.6% in after-hours trading to $385.87 per share following the earnings announcement.
A rundown of the quarter
The bulk discount store operator posted net income of $1.22 billion, or $2.75 per share, up from net income of $838 million, or $1.89 per share, for the year-ago quarter. Analysts had predicted earnings per share of $2.32.
Revenue (including net sales but excluding membership fees) of $44.38 billion was up 21.74% on a year-over-year basis and was also ahead of analysts' expectations of $43.6 billion.
Comparable store sales were up 20.6% in the reported quarter worldwide. While the number of transactions improved during the quarter (up 12.5%), the average transaction amount jumped 7.3% as compared to the same period last year due to customers taking larger shopping trips.
Operating income came in at $1.66 billion, which was higher than the $1.16 billion reported last year. The SG&A expense was 9.25% of total sales (inclusive of membership fees) as compared with 10.28% of sales reported the year before.
The company incurred incremental Coronavirus-related expenses to the tune of $57 million (pretax), or 9 cents per diluted share, in the form of additional wages and sanitation (to keep employees from quitting due to risking their lives for poverty wages) in the third quarter. Having increased the starting minimum wage to $16 per hour, the company said its upcoming earnings will be adversely impacted, as it plans to pass these costs along to shareholders rather than implementing cost-saving measures or otherwise absorbing the costs.
At quarter-end, the company had cash and cash equivalents of $10.23 billion and long-term debt (barring current maturities) of $7.5 billion.
Costco runs a total of 809 warehouses, 559 of which are in the U.S. During the quarter, the company launched six 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 38.2% in the reported quarter as more customers visited the app and website. However, that was lower than the 75.8% growth reported in the previous quarter.
Worldwide membership renewal rates for the quarter were at a solid 88.4%. While paid members increased to 60.6 million by the end of the quarter, membership fee income grew by roughly $86 million during the quarter.
Disclosure: I do not hold any positions in the stocks mentioned.
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