Costco holiday-quarter sales, traffic up; no membership fee hike — yet

Costco Wholesale Corp. maintained momentum in the crucial holiday quarter amid strong e-commerce growth and traffic gains.

The membership warehouse club giant reported earnings that easily topped Wall Street expectations, but its sales came in below estimates.

For its second quarter, ended Feb. 18, Costco’s net income rose to $1.74 billion, or $3.92 per share, compared to $1.47 billion, or $3.30 per share, in the year-ago period. Analysts had expected earnings per share of $3.62.

Net sales for the quarter increased 5.7%, to $57.33 billion, from $54.24 billion last year.  Analysts had expected revenue of $59.16 billion. Sales of food and sundries (includes snacks and beverages) rose in the mid-single digits over last year, CFO Richard Galanti, who will retire on March 15, said on the company’s earnings call. Fresh food sales increased in the high single digits.

Overall comparable sales increased 5.6%, and were up 4.3% in the U.S. Excluding changes in gas prices and foreign currency, comp sales rose 5.8% overall and 4.8% in the U.S.  Digital comp sales rose 18.4%.

On an overall basis, traffic rose 5.3% and increased 4.3% in the U.S., executives said said on the earnings call. The average ticket increased in the U.S. and worldwide. 

Membership fees came in at $1.11 billion compared to $1.03 billion a year ago.  While investors are eager for Costco to raise the fee (the last increase was in 2017), the retailer is still holding firm. On the call, Galanti said the company is not hiking the fee yet. 

“It’s when, not if,” he added.

During the second quarter, Costco opened four new locations, including three in the U.S. and one in Shenzhen, China. Two of the three new U.S. locations were Costco Business Centers, which are geared toward small business owners.

Costco currently operates 875 warehouses, including 603 in the United States 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, six in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia.