Post Earnings Coverage as Costco’s Numbers Missed Expectations; Announced Membership Price Increase

Upcoming AWS Coverage on Burlington Stores Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 17, 2017 / Active Wall St. announces its post-earnings coverage on Costco Wholesale Corp. (NASDAQ: COST). The Company reported its second quarter fiscal 2017 operating results on March 02, 2017. The Warehouse club retailer’s Comparable Sales increased 3%. Register with us now for your free membership at:

http://www.activewallst.com/register/

One of Costco Wholesale’s competitors within the Discount, Variety Stores space, Burlington Stores, Inc. (NYSE: BURL), reported on March 02, 2017, results for Q4 and fiscal year ended January 28, 2017. AWS will be initiating a research report on Burlington Stores in the coming days.

Today, AWS is promoting its earnings coverage on COST; touching on BURL. Get our free coverage by signing up to:

http://www.activewallst.com/register/

Earnings Reviewed

For the twelve weeks ended February 12, 2017, Costco’s net sales increased 6% to $29.13 billion from $27.57 billion last year. The Company’s net sales lagged behind analysts’ consensus of $29.85 billion. On a reported basis, comparable sales (Comp) were up 3% for Q2 FY17 and excluding gas and FX, they still remained up 3%. For the reported quarter, the plus 3% reported comp was a combination of an average transaction increase of a little over 1%, and an average shopping frequency increase of 2%. The Company’s net sales for H1 2017 grew 4%, to $56.60 billion from $54.19 billion last year.

For the four-week reporting month of February, ended February 26, 2017, the Company reported net sales of $8.92 billion, an increase of 8% from $8.28 billion during the similar four-week period last year.

For Q2 FY17, Costco reported net income of $515 million, or $1.17 per diluted share, compared to $546 million, or $1.24 per diluted share, in the year ago comparable period. The Company’s earnings numbers came in below market estimates of $1.36 per share. Costco’s net income for H1 2017 was $1.06 billion, or $2.41 per diluted share, compared to $1.03 billion, or $2.32 per diluted share, in H1 2016.

Membership Details

During Q2 FY17, Costco’s membership fees totaled $636 million, up 5% on a y-o-y basis. The Company continued to enjoy strong renewal rates, coming in a little over 90% in the US and Canada, and 87.7% worldwide on a fully captured basis.

Costco’ members at the end of Q2 FY17, primary Gold Star came in at 37.5 million, up from 12 weeks earlier at 37.1 million. Primary business totaled 7.4 million up from 7.3 million 12 weeks earlier. Business add-on members were 3.4 million at the end of the reported quarter, down from 3.5 million. Overall, the Company had 48.3 million total accounts compared to 47.9 million the earlier fiscal quarter.

At the end of Q2 FY17, Costco reported 88.1 million total card holders, up from 87.3 million 12 weeks earlier. As of Q2 end, the Company’s paid Executive Memberships stood at 17.9 million which is an increase of about 200,000 from 12 weeks earlier, or about 17,000 additional per week. Executive members represented a little over one-third of its member base, and about two-thirds of our sales.

Costco announced that, effective June 01, 2017; it will increase annual membership fees by $5 for US and Canada Goldstar (individual), Business, and Business add-on members (“Primary” Members). With this increase, all US and Canada Goldstar, Business and Business add-on members will pay an annual fee of $60. Also effective June 01, annual fees for Executive Memberships in the US and Canada will increase from $110 to $120 (Primary membership of $60, plus the Executive upgrade of $60), and the maximum annual 2% reward associated with the Executive Membership will increase from $750 to $1,000. The fee increases will impact around 35 million members, roughly half of them Executive Members.

Store Update

Costco currently operates 728 warehouses, including 508 in the United States and Puerto Rico, 94 in Canada, 37 in Mexico, 28 in the United Kingdom, 25 in Japan, 13 in Korea, 13 in Taiwan, 8 in Australia, and 2 in Spain. Costco also operates electronic commerce web sites in the US, Canada, the United Kingdom, Mexico, Korea, and Taiwan.

In Q2 FY17, the Company opened four new locations. Those included Costco’s 13th unit in each of Korea and Taiwan, as well as two new locations in Florida, in the Tampa area. For all of FY17, the Company has plans of 29 net new locations, so 17 additional openings during the third and fourth quarters of FY17 are planned. Of the 29 for the year, 14 in the US, 8 in Canada, and 1 each in Japan, Korea, Taiwan, Mexico, and Australia, as well as its first openings in France and Iceland, most likely in mid to late May.

Stock Performance

On Thursday, March 16, 2017, the stock closed the trading session at $167.06, slightly up 0.31% from its previous closing price of $166.54. A total volume of 2.73 million shares have exchanged hands, which was higher than the 3-month average volume of 2.33 million shares. Costco Wholesale’s stock price advanced 4.84% in the last three months, 11.50% in the past six months, and 9.68% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 4.62%. The stock is trading at a PE ratio of 30.85 and has a dividend yield of 1.08%.

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