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Costco's (COST) fourth quarter results beat estimates on both the top and bottom lines as consumers continued to flock to the retailer for value.
For the fiscal fourth quarter, Costco reported adjusted earnings per share of $4.86, higher than Wall Street expectations of $4.78. Revenue also came in higher at $78.94 billion, compared to expectations of $77.72 billion, per Bloomberg data.
The company's latest earnings, which were reported Tuesday after market close, come as major headwinds like higher gas prices, student loan repayments, and higher interest rates, among others, take a toll on Americans' wallets.
"We think the company is well-positioned to gain share in the current environment," Jefferies analyst Corey Tarlowe said following the results.
Same-store sales, including gas and foreign exchange, came in slightly lower than anticipated — up 1.1% compared with estimates of 1.87%. Excluding gas and FX, sales jumped 3.8%, slightly below expectations for 3.92%.
Raymond James analysts wrote in a note ahead of earnings that Costco’s gas business faces a difficult prior-year comparison given significant fuel margin expansion last year.
Investors appeared to take their cue from the same-store sales miss. Shares fell 2.3% in pre-market trading on Wednesday. The company's ticker page was the number one most active on the Yahoo Finance platform.
Gas prices spiked over the summer compared to earlier in 2023, making Costco's cheap fuel attractive for customers. As of Tuesday, the national average gas price stood at $3.84 per gallon, per AAA, slightly off the 2023 high but still below the recent peak of over $5 per gallon seen in 2022.
On the earnings call, CFO Richard Galanti said there has "not been a heck of a lot of change" when it comes to consumer spending amid fuel inflation.
Costco's average ticket size dropped 3.9% compared to a year ago due to "weakness in bigger-ticket nonfoods discretionary items as well as the gas price deflation." Galanti also noted the company added 40 or 50 "smaller-ticket indulgent items" to cater to changing consumer demand.
He also noted that the gas business continues to contribute to the company's bottom line.
"Gas has been stronger for us, and we believe [for] all retailers in the last few years," Galanti said. "At the end of the day, we feel good about our competitive position [on gas prices]. It's increased and we're still quite profitable. Down a little bit from a year ago, but nonetheless quite profitable."