Costco Wholesale Corporation Q3 2024 Financial Report

Date: June 7, 2024

Ticker: COST

Exchange: NASDAQ

Sector: Consumer Defensive

Industry: Discount Stores

Link to Full Report: SEC Report

Executive Summary

In the third quarter of fiscal 2024, ended May 12, 2024, Costco Wholesale Corporation demonstrated robust financial performance and continued growth. The company maintained its commitment to offering exceptional value to its members, which was reflected in the quarterly results, marked by significant increases in net sales and comparable sales across various regions.

Financial Highlights

Income Statement

Costco reported net income of $1.68 billion, equating to an EPS of $3.78, a notable increase from $1.3 billion and $2.93 per diluted share reported in the same period last year. The revenue for Q3 2024 reached $57.39 billion, representing a 9.1% rise from $52.6 billion in Q3 2023.

Sales Performance

Comparable sales showed positive trends across all regions. The U.S. saw a 6.2% increase (6% adjusted for gas inflation and FX), Canada experienced a 7.7% rise (7.4% adjusted), and other international markets recorded a 7.7% surge (8.5% adjusted). E-commerce comparable sales notably surged by 20.7%.

Operating Metrics

Gross margin for the quarter stood at 10.84%, up from 10.32% the previous year, driven by initiatives in non-food categories and merchandise innovations. SG&A expenses improved, decreasing as a percentage of sales to 8.96% from 9.11% the prior year.

Geographical and Segment Performance

Costco continued its expansion strategy with the opening of new warehouses. In Q3, the company inaugurated two new warehouses in the U.S., with additional openings planned across the U.S. and Asia, enhancing its global footprint.

Membership Metrics

The company reported strong membership growth, ending Q3 with 74.5 million paid household members, a 7.8% increase year-over-year. The executive member base also grew, representing 46% of total paid members and contributing significantly to sales.

Operational and Strategic Initiatives

Costco introduced multiple product innovations, particularly in non-food categories such as toys, electronics, and health and beauty aids. The introduction of new Kirkland Signature products, like the men's walking shoe and facial wipes, has been well received by customers.

On the digital front, the company enhanced its app and website functionalities, which contributed to a significant rise in e-commerce sales. The expanded relationship with Uber, providing delivery services in new regions, further exemplified Costco’s commitment to convenience and value for its members.

Financial Ratios and Market Data

Costco’s Altman Z-Score is 9.3, indicating a very strong financial position. The Piotroski F-Score stands at 7, reflecting solid financial health. The company’s market capitalization as of the report date was $374.18 billion.

Comparative Analysis

In comparison to its peers, Costco's gross profit margin and operating profit margin were lower due to its strategy of reinvesting in member value. However, its inventory turnover ratio and asset turnover ratios were significantly higher, reflecting efficient inventory and asset management.

Conclusion

Costco Wholesale Corporation's performance in Q3 2024 showcases its ability to adapt and thrive in varying economic conditions, driven by its focus on value, member satisfaction, and strategic growth initiatives. The company remains well-positioned for continued success, bolstered by strong membership growth and innovative merchandising strategies.