Costco Wholesale followed one strong year with another.
The Issaquah, Wash.-based warehouse club chain delivered double-digit net and comparable sales growth for the fourth quarter and full year of fiscal 2022, while beating consensus guidance earnings per share on Wall Street for both periods.
In the 16-week quarter ended Aug. 28, net sales were $70.76 billion, up 17.5% from $61.44 billion a year earlier, Costco reported. yesterday after market close. The increase marked a 17.5% increase in the fiscal 2021 quarter.
Total comparable sales in the quarter increased 13.7% from a year ago (10.4% adjusted, excluding fuel and currency), reflecting gains of 15.8% in the United States ( 9.6% adjusted), 13.4% in Canada (13.7% adjusted) and 2.9% internationally (11.3% adjusted). A year ago, Costco reported mockup sales increased 15.5% (9.4% adjusted), including a 14.9% increase in the United States (10.3% adjusted).
“In terms of fourth quarter comp sales metrics, traffic or purchase frequency increased 7.2% globally and 5.2% in the US. Our average transaction or ticket increased 6 percent worldwide and 10.0 percent in the U.S. during the fourth quarter,” Costco said. Chief Financial Officer Richard Galanti told analysts on a conference call Thursday night.
“A lot of you have been asking about private label with the recent inflationary environment and what’s going on, are people going down? And of course our first answer is they’re not going down not. They are certainly increasing or exchanging the same.” — Richard Galanti, CFO of Costco (Photo courtesy of Costco)
Gasoline price inflation pushed sales up about 5.5% in the fourth quarter, while the exchange rate negatively impacted sales by just over 2%, reported Galanti.
“The best-performing core categories in the quarter were candy, frozen, kiosks, tires, lawn and garden, jewelry, toys, bakery and delicatessen,” he said. . “In terms of ancillary businesses, the best performers were Gas and Food Courts. And in other businesses, travel and business centers performed best compared to the results of the previous fiscal fourth quarter. »
Commenting on inflation, Galanti cited “minor improvement in a few areas” despite continued pressures on commodity prices, wages, transportation costs and supply chain disruptions.
“They are still there, but we only see a small light at the end of the tunnel,” he explained. “And if you recall, in the third quarter, we reported that headline price inflation was around 7% and above for us. For the fourth quarter, and speaking with our traders, the estimated overall price inflation was around 8%, a little higher on the food and sundries side, a little lower on the fresh food side , and both upper and lower on the nonfood side. »
Galanti threw cold water on the idea of Costco members trading store brands amid high prices.
“A lot of you have been asking about private label with the recent inflationary environment and what’s going on, are people selling less? And of course our first answer is that they are not decreasing. They are certainly swapping or exchanging the same,” he said. “In terms of Kirkland Signature merchandise penetration, and excluding gas and other businesses that carry the Kirkland name, Kirkland Signature merchandise is up just under 1% in penetration from a year ago. year. Our penetration of KS merchandise is approximately 28% for the year. This is similar to historical trends, where it increases slowly and steadily over time. So no big dramatic change from the past there.
Fourth-quarter e-commerce sales increased 7.1% (8.4% excluding currency) from a year earlier. “The strongest departments in terms of year-over-year percentage increases were Tires, Lawn, Patio & Garden, Prescription Pharmacy, and Health & Beauty Aids,” Galanti said. “The largest dollar e-com merchandise department, what we call the majors, which includes everything from computers to appliances to TVs, audio and more, was up single digits . And Costco Grocery, including our Third-Party, Dry, Fresh and Frozen Two-Day Delivery, continues to grow. They increased by 20% over the quarter.
In food, the top-performing categories for Costco in the fourth quarter included candy, frozen, bakery and deli meats.
Membership fee revenue increased 7.5% year over year (10.5% excluding the impact of currency exchange rates) to $1.33 billion. The total number of paying member households increased by 6.5% to 65.8 million, and the total number of cardholders also increased by 6.5% to 118.9 million.
“In terms of membership fees and a possible increase, there are no specific plans regarding a fee increase at this time,” according to Galanti. “We are pleased with the growth in our sales and membership households over the past few quarters, and member loyalty is reflected in increased member renewal rates.”
For fiscal 2022, net sales were $222.73 billion, up 16% from $192.05 billion in fiscal 2021, when the company posted a gain of 17. 7%. Full-year model sales for all 52 weeks increased 14.4% overall (10.6% adjusted, excluding fuel and currency), reflecting increases of 15.8% in the United States ( 10.4% adjusted), 15.2% in Canada (12.1% adjusted) and 6.6% internationally (13.4% adjusted). In fiscal 2021, Costco reported overall comp sales growth of 16% (13.4% adjusted), including a 14.8% gain in the United States (13.6% adjusted).
Fiscal 2022 e-commerce sales jumped 10.1% (10.4% ex-currency) after growing 44.4% (42.6% ex-currency) on a comparable basis during the financial year 2021.
Ultimately, Costco’s fourth quarter 2022 net income totaled $1.87 billion, or $4.20 per diluted share, compared to $1.67 billion, or $3.76 per diluted share, it a year ago. Analysts, on average, had forecast fourth-quarter adjusted EPS of $4.16, with estimates ranging from a low of $3.69 to a high of $3.50, according to Refinitiv.
Full-year 2022 net income was $5.84 billion, or $13.14 per diluted share, compared to $5.01 billion, or $11.27 per diluted share , in 2021. The consensus analyst estimate was for adjusted EPS of $13.13, with projections ranging from a low of $12.73 to a high of $13.43, according to Refinitiv.
Costco is well positioned for further market share gains in the future, according to Jefferies analyst Corey Tarlowe.
“Costco is an inherently defensive name due to its membership model which generates predictable sales and earnings, an attractive value orientation, higher income customer and relatively high consumable penetration as a percentage of sales,” wrote Tarlowe in a research note published Friday. “Additionally, the company continues to open new clubs in the United States and has significant avenue for continued international expansion. Additionally, we believe Costco is likely to increase its membership fees in the future. not too far off, providing an advantage to upcoming estimates.
In fiscal 2022, Costco said it opened 26 warehouse clubs, including three relocations, for a net gain of 23 for the year. This includes nine in the fourth quarter, including five in the United States, two in Canada and one each in Korea and Japan.
“In FY23, we plan to open 29 new warehouses, including four relos, for a network of 25 new warehouses,” Galanti said on the analyst call. “These 25 planned net new openings are made up of 15 in the United States and 10 in other countries, including our first sites in New Zealand and Sweden and our third and fourth sites in China.”
Currently, Costco operates 838 total warehouse clubs, up from 817 a year ago. By market, the retailer operates 578 clubs in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom, 17 in Korea, 14 in Taiwan, 13 in Australia, four in Spain , two each in France and China, and one in Iceland. Costco also operates e-commerce sites in the United States, Canada, United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.
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