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• Costco reports market-beating results for its fiscal fourth quarter.
• Its shares are still trading down in extended hours on Tuesday.
• Jefferies analyst Corey Tarlowe shared his view on Costco today.

Costco Wholesale Corporation (COST) is trading down in extended hours even though it reported market-beating results for its fiscal fourth quarter.

Jefferies analyst shares his view on Costco

Even though the membership warehouse retailer came in ahead of Street estimates – pockets of weakness in the United States were evident in its earnings release.  

Its U.S. comparable sales were up only 0.2% in the recently concluded quarter and now that student loan repayments are about to resume, things will likely lose steam further moving forward, as per Jefferies analyst Corey Tarlowe.

We conducted a survey of 600 U.S. consumers with student loans, the average payment is likely to be $460 a month which could take a big chunk out of many people’s wallets.

Note that inflation isn’t making it any easier for retailers either. Consumer prices in the U.S. were up 0.6% last month versus 0.2% in July (link). Costco stock is up 20% year-to-date at writing.

Notable figures in Costco Q4 earnings release

• Eared $2.16 billion versus the year-ago $1.87 billion
• Per-share earnings also increased from $4.20 to $4.86
• Revenue jumped nearly 10% year-on-year to $78.94 billion
• Consensus was $4.79 per share on $77.72 billion revenue
• Same-store sales also climbed a better-than-expected 1.1%

Costco saw its e-commerce sales slip 0.8% in its fourth quarter. On CNBC’s “Worldwide Exchange” this morning, Jefferies’ Tarlowe added:

I think with the consumer environment ahead, you need to be a bit hesitant. Discounting has been a bit elevated; I think it illustrates that the consumer has become a bit more stretched.

Nonetheless, the analyst maintained his “buy” rating on Costco stock today. His $640 price target on the retail company suggests another 20% upside from here.

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