Costco’s Q2 misses on sales, delivers on earnings
Costco Wholesale reported sales that missed the Street amid fierce competition to attract shoppers in the grocery space, but its earnings topped expectations.
Net income totaled $1.1 billion, or $2.47 a share, in the quarter ended Sept. 1, compared with $1.04 billion, or $2.36 a share, in the year-ago period. Costco said results included a charge of 22 cents a share for a product tax assessment. Excluding one-time items, earnings were $2.69 per share. Analysts were looking for earnings of $2.54 a share.
Total revenue rose to $47.50 billion from $44.41 billion, missing analysts’ estimates of $47.57. Total comparable sales, including online, rose 5.1%, excluding the impact of fuel and currency fluctuations. In the U.S., comparable-store sales, excluding fuel, rose 5.2%.
In August, Costco opened its first location in China, in Shanghai. Traffic was so busy on opening day the store had to close early. On the company’s quarterly earnings call, CFO Richard Galanti said that the crowds are now well managed and that sales have remained strong during the past month. Costco plans to open a second Shanghai store in 2021.
Costco executives said the company is working to mitigate the impact of import tariffs linked to the U.S.-China trade dispute.
"Since the beginning of these tariffs over a year ago, we continue to be active in managing and we're possibly mitigating the impact where we can," CFO Richard Galanti said on the quarterly call. "In some cases, we've reduced our commitments on certain items. And again, just on the impact of what we expect, we look at alternative country sourcing where possible and feasible and although again, there's a limited amount of that ability to do that."
Costco currently operates 783 warehouses, including 544 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain, one in France, one in Iceland, and one in China. Costco also operates e-commerce web sites in the U.S., Canada, the United Kingdom, Mexico, Korea and Taiwan.