Costco Profit Tops Estimates as Sales Gains Outpace Wal-Mart

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Costco Wholesale Store
Employees load a customers purchases into a shopping cart at a Costco Wholesale Corp. store in East Peoria, Illinois. Photographer: Daniel Acker/Bloomberg

Costco Wholesale Corp., the largest U.S. warehouse-club chain, posted third-quarter profit that topped analysts’ estimates as sales gains outpaced those at discount rivals such as Wal-Mart Stores Inc.

Profit rose to $1.17 a share in the three months through May 10, the company said Wednesday in a statement. The average of analysts’ estimates compiled by Bloomberg was $1.16.

Costco, which focuses on selling large volumes of goods to its members at low prices, has outperformed Wal-Mart and Target Corp. recently. Sales at Costco stores open a year or more rose 6 percent in the quarter, excluding changes in gasoline prices and foreign-currency exchange rates. In its most recent quarter, Target reported a 2.3 percent gain, while Wal-Mart’s Sam’s Club warehouse chain posted a 0.4 percent increase.

Costco remains a top retail stock, thanks to its “treasure-hunt shopping experience, experienced buying team, low price leadership and sustainable global competitive advantage,” Oliver Chen, an analyst at Cowen & Co., said in a report after the results were released.

Costco declined 0.8 percent to $144.26 at the close in New York. Shares of the Issaquah, Washington-based company have gained 1.8 percent this year.

Sales Gain

Sales in the quarter rose 1 percent to $25.5 billion. Revenue from membership fees advanced 4 percent to $584 million.

Sam’s Club, meanwhile, has suffered from having a lower-income clientele and a weaker product lineup. Rosalind Brewer, the head of Sam’s Club, said last week that improving merchandise assortment was a key focus for the chain.

Costco has built a following for its Kirkland Signature private-label products -- everything from handbags to hearing aids -- and they account for about 20 percent of the items sold by the chain.

“Costco continues to gain warehouse-club share as their largest competitor is undergoing the early stages of a transformation effort,” said David Schick, an analyst at Stifel Financial Corp.

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