Costco Stock Drops 2% as U.S. Same-Store Sales Miss Expectations

Costco, a prominent membership-based warehouse club, experienced a 2% decline in its stock price following the release of its fourth-quarter financial report. The report revealed that the company's same-store sales in the United States fell short of expectations, despite overall revenue and earnings exceeding market forecasts.

The company's total revenue for the quarter was 861.6 billion dollars, slightly above the expected 860.3 billion dollars. Adjusted earnings per share were 5.87 dollars, surpassing the anticipated 5.82 dollars. However, the same-store sales growth in the U.S. was 6%, which was lower than the expected 6.1%. This underperformance in the core market contributed to the stock price decline.

Internationally, Costco's performance was more robust. The Canadian market saw an 8.3% increase in sales, surpassing the predicted 6.8%. Other international markets also showed a 7.2% growth, meeting expectations. The company's overall same-store sales growth was 6.4%, slightly above the 6.2% forecast.

For the full fiscal year, Costco's revenue reached 2752.4 billion dollars, with adjusted earnings per share at 18.21 dollars, both exceeding market expectations. The company's same-store sales growth for the year was 7.6%, also surpassing the 7.5% forecast.

Chief Financial Officer highlighted the importance of "everyday low-priced items" in an uncertain economic environment. While new and high-value items were well-received, consumers remained cautious with discretionary spending. Examples of popular items included hot dog combos, rotisserie chickens, and Kirkland Signature brand toilet paper.

The company sold over 245 million hot dog combos and 157 million rotisserie chickens in the fiscal year. The toilet paper sales were so substantial that if stacked, they would reach the moon and back over 200 times.

Despite the stock price decline, Costco's membership fee revenue increased by 14% year-over-year, reaching 17.2 billion dollars. The number of cardholders also grew by 6.1%. The company acknowledged new competition in the market and plans to closely monitor the situation. Costco has partnered with Uber Eats and Instacart to offer same-day delivery, a service that is growing at a "good pace" and remains a "high-potential business."

To mitigate the impact of tariffs, Costco has been working closely with suppliers to adjust production locations, integrate global procurement to lower costs, and adjust product categories when appropriate. The company has increased its focus on health and beauty products, fresh foods, tires, and mattresses. For the upcoming holiday season, Costco plans to offer a different product mix, carefully evaluating non-essential items while ensuring the availability of essential products like Christmas trees.

By strategically managing its product offerings and focusing on high-value items, Costco aims to maintain its competitive edge in the retail market. The company's ability to adapt to changing consumer preferences and economic conditions will be crucial in sustaining its growth and profitability.