Costco's Q1 Earnings Miss Estimates, Sales Surpass

After two straight quarters of positive earnings surprises, Costco Wholesale Corporation (COST - Free Report) missed the Zacks Consensus Estimate in the first quarter of fiscal 2019. However, revenues surpassed estimates for the seventh successive quarter. Notably, the top and the bottom lines continued to register year-over-year improvement. The company also delivered comparable store sales (comps) growth across all regions. E-commerce sales during the period were also sturdy.

However, shares of this operator of membership warehouses declined 2.7% during after-market trading session on Dec 12. The downside may have been caused by dismal margins in the reported quarter as well as earnings miss. Nevertheless, strength in comparable sales, healthy membership trends, increasing penetration of e-commerce business and other growth-oriented efforts have been boosting investors’ optimism in this Zacks Rank #3 (Hold) stock.

The company’s shares have rallied 9% in the past six months, outperforming the industry’s rise of 0.8%. 

Q1 Earnings & Sales Picture

This Issaquah, WA-based company reported adjusted quarterly earnings of $1.61 per share that fell short of the Zacks Consensus Estimate by a penny. However, adjusted earnings improved 18.4% from the year-ago quarter’s figure of $1.36.

Total revenues, which include net sales and membership fee, came in at $35,069 million, up 10.2% from the prior-year quarter’s figure. The figure surpassed the consensus estimate of $34,628 million.

We noted that in the reported quarter, the company’s e-commerce comparable sales surged 32.3% year over year. Excluding the effect of gasoline prices, foreign exchange and accounting change concerning revenue recognition (ASC 606), the same depicted a rise of 26.2% year over year. This reflects the company’s efforts to drive online sales.

With the prevailing trend of digital transformation in the sector, retailers are rapidly adopting the omni-channel mantra to provide a seamless shopping experience online and in stores. Costco, which shares space with Walmart (WMTFree Report), Amazon (AMZN - Free Report) and Target (TGT - Free Report) , is also following the same trend.

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