Costco Wholesale Corp. (COST, Financial)’s stock price fell as much as 4.18% in after-hours trading after the company produced fiscal fourth-quarter results.
The warehouse retailer traded around $222 per share Thursday evening after reporting $43.4 billion in revenue for the quarter, a 5% increase from the same quarter a year earlier. Analysts polled by Reuters expected $44.26 billion. Net income totaled $1.043 billion, or $2.36 per share, compared to $919 million, or $2.08 per diluted share, a year prior. The result for earnings per share met analysts’ estimates of $2.36.
The company warned that it expects to report “material weakness in internal control” related to its financial reporting in its 2018 annual report form 10-K. Costco said it had made no misstatements in its financial statements as a result of the weakness and plans to file its 10-K on time.
During the quarter, Costco opened 21 net new units, with 13 in the U.S. and eight internationally, the company’s CEO Walter Jelinek, said on a conference call. In 2019 it plans to open a number in the low 20s. Its first store in China remains under construction and is expected to open late next September.
Costco repurchased $89 million of its stock during the quarter at an average price of $211.35 per share.
The company’s e-commerce business, including same-day and two-day delivery, is “growing nicely” by stayed a “very small part” of its sales, Jalinek said on a conference call. He later said it was a “shade under” 5% of sales.
“We have the benefit of having not focused on [e-commerce] a lot for many years and now taking advantage of it in a big way,” he said.
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Jalinek outlined the steps it has taken to prepare for the onset of tariffs on goods from China, including accelerating shipments before the tariffs go into effect and working with suppliers to reduce costs. The company is also looking into alternative country sourcing, but Jalinek said it encountered “limited availability” and that it “takes time.”
“Our DNA is we want to be the last to raise the prices and we want to work with any supplier to do that, but ultimate we can’t eat all these,” he said.
Costco finds itself in the portfolios of many prominent investors, including Warren Buffett (Trades, Portfolio), who owns 0.99% of its shares with the largest holding of investors tracked by GuruFocus. Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) initiated stakes in the second quarter, while Jim Simons (Trades, Portfolio) severed 98.03% of his position.
Costco shares had traded up to a 2.19% decline from their Thursday market close by near the end of the earnings call at $226.60. The stock has gained 23.8% year to date, near even with its competitor Target (TGT, Financial)'s 27% rise and surpassing Walmart (WMT, Financial), which has fallen 4.58%.
Costco has a price-earnings ratio of 34.37, price-sales ratio of 0.74 and price-book ratio of 8.48, each of which is near its 10-year high.
