Costco's Q2 Earnings Surpass Estimates, Rise Y/Y

After witnessing negative earnings surprise in the first quarter of fiscal 2019, Costco Wholesale Corporation (COST - Free Report) surpassed the Zacks Consensus Estimate in the second quarter. However, revenues fell short of the consensus mark, after surpassing the same in seven successive quarters.  Notably, the top and the bottom line continued to register year-over-year improvement. The company also delivered comparable store sales (comps) growth across all regions on an adjusted basis. E-commerce sales during the period were also sturdy.

Certainly, strength in comparable sales, healthy membership trends, increasing penetration of e-commerce business and other growth-oriented efforts have been bolstering investors’ optimism in this Zacks Rank #3 (Hold) stock.

The company’s shares have rallied 15% in a year compared with the industry’s growth of 18%. 

Q2 Earnings & Sales Picture

This Issaquah, WA-based company reported quarterly earnings of $2.01 per share that came ahead of the Zacks Consensus Estimate of $1.67. The quarterly earnings improved 26.4% from the year-ago quarter’s figure of $1.59, which included tax benefit of 17 cents. Excluding the same from the prior-year figure, the quarterly earnings surged 41.5% year over year.

Total revenues, which include net sales and membership fee, came in at $35,396 million, up 7.3% from the prior-year quarter’s figure. The figure, however, marginally fell short of the consensus estimate of $35,540 million.

We noted that in the reported quarter, the company’s e-commerce comparable sales surged 20.2% year over year. Excluding the effect of gasoline prices, foreign exchange and accounting change concerning revenue recognition (ASC 606), the same exhibited a rise of 25.5% 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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