Costco Wholesale kicked off its 2024 fiscal year with solid net and comparable sales gains for the first quarter, topping Wall Street’s earnings-per-share forecast and announcing a special dividend of $15 per share.
For the 12-week quarter ended Nov. 26, net sales came in at $56.72 billion, up 6.1% from $53.44 billion a year earlier, Costco reported Thursday after the market close. The increase built on an 8.1% net sales increase in the fiscal 2023 quarter.
Total comparable sales in Q1 climbed 3.8% from a year ago and were up 3.9% excluding the impact of changes in gasoline pricing and foreign exchange rates, Costco said.
By region, comp sales in the quarter grew 2% in the United States (+2.6% adjusted), 6.4% in Canada (+8.2% adjusted) and 11.2% internationally (+7.1% adjusted). A year ago, Costco reported that comp sales rose 6.6% (+7.1% adjusted), including a gain of 9.3% in the U.S. (+6.5% adjusted).
“Overall for the first fiscal quarter, fresh foods were relatively strong once again with food and sundries right behind,” Chief Financial Officer Richard Galanti told analysts in a conference call late Thursday. “Nonfoods showed improvement over the September-October-November time frame, as did e-comm sales. In terms of Q1 comp-sales metrics, traffic or shopping frequency increased 4.7% worldwide and 3.6% in the United States. Our average transaction was down 0.9% worldwide and down 1.6% in the U.S.” (Call transcript provided by AlphaSense.)
First-quarter e-commerce sales grew 6.3% (+6.1% adjusted) year over year, ending a string of declines that included fiscal 2023 decreases of 0.8% (-0.6% adjusted) in Q4, 10% (-9% adjusted) in Q3, 9.6% (-8.7% adjusted) in Q2 and 3.7% (-2% adjusted) in the first quarter.
“In terms of e-commerce business, e-comm sales in Q1 ex-FX increased 6.1%, the first quarterly year-over-year increase in five fiscal quarters, and trended well during the three reporting periods of September, October, November,” Galanti said. “E-comm showed strength in several areas: food, things like e-gift cards, craps computer game, pet items, snack items were up in the mid-teens. Appliances were up year over year in the mid-20s. TVs was actually in the high-singles, despite the challenges with other aspects of consumer electronics, like computers. And tires were up in the low-teens. So, overall, a pretty good showing there.”
Membership fee income gained 8.2% year over year to $1.08 billion in the first quarter, above the 5.7% increase in the prior-year period.
“Membership growth continues. We ended Q1 with 72 million paid household members, up 7.6% versus last year, and 129.5 million cardholders, up 7.1%, with consistent growth throughout the quarters,” Galanti reported.
Special dividend tops last payout three years ago
At the bottom line, Costco’s 2024 first-quarter net income totaled $1.59 billion, or $3.58 per diluted share, compared with $1.36 billion, or $3.07 per diluted share, a year ago. Analysts, on average, had projected Q1 adjusted EPS of $3.41, according to FactSet.
On Thursday, Costco’s board of directors declared a special cash dividend of $15 per share of common, payable on Jan. 12 to shareholders of record as of the close of business on Dec. 28. The aggregate payment amount will total about $6.7 billion, Costco said.
The special dividend marks the fifth announced by Issaquah, Wash.-based Costco in 11 years. Previous payments included per-share dividends of $10 in December 2020, $7 in May 2017, $5 in February 2015 and $7 in December 2012.
“In terms of warehouse expansion, in the first quarter, we opened 10 locations, including one relocation, so a net of nine [new clubs]. Those nine included eight in the U.S. and one in Canada,” said Galanti. “For full-year fiscal 2024, we’re planning to open 33 locations, including two relocations, so a net increase of 31 new warehouses. That would be up from 23 that we opened in fiscal 2023. For Q2 fiscal 2024, we plan four new locations, including our sixth building in China early in the calendar year.”
Costco currently operates 871 wholesale clubs, compared with 847 a year earlier. By market, the company has 600 clubs in the U.S. and Puerto Rico, 108 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one apiece in Iceland, New Zealand and Sweden. Costco also runs e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
William Blair & Co. analyst Phillip Blee noted that Costco’s Q1 performance signaled a strong start to fiscal 2024, while the company’s latest special dividend represented its largest recent payout.
“Shares of Costco are up roughly 2% in after-hours trading on the strong quarter and holiday performance,” Blee wrote in a research note released early Friday. “We remain encouraged by the company’s healthy traffic gains and stability across its membership base, which should continue to insulate the model against a volatile demand environment. We believe Costco’s leading value proposition centered around low prices, high-quality products, and its private-label brand, should fuel ongoing momentum in traffic as inflation-battered consumers continue to seek opportunities for savings.” winsight grocery
