Costco Wholesale Corp. (COST, Financial) released its second-quarter results after the market closed on March 7. Strong earnings, which beat analysts' estimates, were aided by a decline in gas prices as well as a shift to lower-cost sourcing. Revenue, however, failed to meet expectations even though comparable store sales were strong over the holiday season.
Numbers for the quarter
The warehouse club operator posted earnings of $2.01 per share, up 42%. Revenue grew approximately 7% to $35.4 billion.
Same-store sales surged 6.7% in the quarter, barring fuel and foreign exchange moves. In the U.S., comparable sales climbed 7.2%, ahead of the 6.7% consensus estimate.
Costco’s gross margin was 11.3%. Operating income stood at $1.2 billion, reflecting an 18.4% increase from the prior-year quarter. As a percentage of sales, the operating margin increased 30 basis points to 3.4%.
At the end of the second quarter, Costco had $6.08 billion in cash and cash equivalents. Long-term debt, excluding current maturities, was $4.8 billion.
Costco stepped up its online game
The company is currently focusing on strenghtening its online presence by adding products like Apple (AAPL, Financial) MacBooks and La Mer cosmetics. Costco also augmented its shipping options by offering same-day delivery of groceries through Instacart.
As a result, Costco posted online comps growth of 25% in the second quarter.
What’s next?
In the U.S. and Canada, Costco announced it is increasing its starting wage to $15 and $15.50 per hour from the previous rate of $14 and $14.50 per hour. The pay increase, coupled with a rise in supervisors' wages, will add three or four basis points to selling, general and administrative expenses over the next four quarters.
Disclosure: I do not hold any positions in the stocks mentioned.
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