Costco Wholesale Corp. (COST, Financial) reported better-than-expected third-quarter 2017 earnings as the warehouse chain posted $28.86 billion in revenues during the quarter, a solid growth of 7.8% compared to last year. Costco was unaffected by the problems that have plagued big retailers like Target (TGT, Financial) and Kroger (KR, Financial), and comparable store sales during the quarter rose 6% in the United States, better than any other brick-and-mortar retailer with more than $100 billion in revenues.
Costco reported earnings per share of $1.40 on the back of $28.86 billion in revenues, while Wall Street was expecting earnings per share of $1.31 and revenues of $28.65 billion. As brick-and-mortar retailers across the country continue to struggle, Costco managed to accelerate comparable store sales throughout the last nine months. Comps growth for the first, second and third quarters now read 1%, 3% and 6%.
Costco has been slowly adding to its store count, finishing third-quarter 2017 with 732 stores, up from 715 warehouses the company had at the end of fiscal 2016. With 26 net locations planned for fiscal 2017, store additions will provide a lot of support to sales growth.
Membership renewal rates remained as good as ever, with 94.1% of business members opting to renew their membership, slightly down from the 94.3% renewal rate at the end of the last quarter. Gold Star membership renewals have stood at 90.2% for the last two quarters while the international membership renewal rate was 87.5%, slightly lower than the 87.7% at the end of the second quarter.
E-commerce still remains a bit of concern for Costco. The company seems to be happy with a slow and steady approach. Online sales were up 11% during the third quarter compared to last year.
Store growth coupled with strong comparable store sales allowed Costco to post total revenues of $86.815 billion in the first nine months of the current fiscal, up 5.6% from $82.159 billion in the prior-year period. With membership fees increasing on June 1, Costco will be looking forward to finishing 2017 on a high note. Considering the state of the retail market, the company’s performance is commendable.
Disclosure: I have no positions in the stock mentioned above and have no intention of initiating a position in the next 72 hours.
