Hot Retail Stock to Watch: Costco Wholesale Corporation (NASDAQ: COST)

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Costco Wholesale Corporation (NASDAQ: COST) stock rose over 0.54% on 11th December, 2020 (As of 11:19 am GMT-5; Source: Google finance) after the company posted better than expected results for the first quarter of FY 21 as homebound Americans continue to spend more on food, home goods and fitness products during the pandemic, especially the high-income shoppers that make up much of the warehouse chain’s shopper base.

Comparable sales, those from stores or digital channels operating for at least 12 months, grew 17.1% during the first quarter ended Nov. 22, excluding the impact of gasoline sales and currency movements. In terms of the first quarter comp sales metrics, on a reported basis, for the U.S., the company reported a 14.6% figure, excluding gas deflation and FX impacts, the 14.6% for the 12 weeks would have been 17.0% increase. Canada, for the 12 weeks reported 16.2% ex gas and FX 16.8%. Other international posted 18.7%, ex gas and FX 17.7%.

The company’s e-commerce sales grew 86% in the first quarter. However, for online orders, COST is currently struggling with some shipping delays. In terms of Q1 comp sales metrics, traffic or shopping frequency rose 5.5% worldwide and plus 7.6% in the U.S. The average transaction size was up for the company 9.4% in the quarter year-over-year and up 6.5% in the U.S.

The company has reported net income for the first quarter of $1.166 billion compared to $844 million last year. The membership fee income came in at $860.9 million, up 7.1%. In terms of renewal rates, the U.S. and Canada renewal rate as of the end of Q1 2021 was 90.9%, that compares to a quarter ago of 91.0% and worldwide, it was 88.4%, which was the same as it was a quarter ago. Now the U.S. and Canada rate is of 90.9%, compared to the 91.0% this 0.1% decline was mainly due to the deferred renewals in Canada driven by the pandemic.

COST in the first quarter of FY 21 has reported the adjusted earnings per share of $2.29, beating the analysts’ estimates for the adjusted earnings per share of $2.04, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 16.7 percent to $43.21 billion in the first quarter of FY 21, beating the analysts’ estimates for revenue of $43.16 billion. The company delivered higher year-over-year gross margin in the first quarter by 50 basis points coming in at 11.55% of sales, compared to 11.05% a year ago.

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