Retail stock under pressure: Costco Wholesale Corporation (NASDAQ: COST)

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Costco Wholesale Corporation (NASDAQ: COST) stock rose over 0.9% on October 4th, 2019 (as of 11:31 am GMT-4; Source: Google finance) despite mixed performance. The company has reported net income for the quarter of $1.097 billion in the fourth quarter of FY 19 as compared to $1.043 billion a year ago. Adjusted net income has risen 14%.

The US supermarket chain struggled to lure shoppers in a competitive grocery space. US grocers compete fiercely to attract shoppers and also face the threat of Amazon expanding into the space, forcing Costco and other grocers to cut prices and invest heavily in stores and online.

Meanwhile, COST is expanding internationally, opening its first warehouse in China about two months ago, where overcrowding and traffic jams in the neighborhood forced the retailer to limit the number of shoppers in the store. Costco had reported record membership sign-ups in Shanghai, partly due to its social media presence, with more than 20,000 registered members. The company plans to open its second Shanghai store in 2021.

COST in the fourth quarter of FY 19 has reported the adjusted earnings per share of $2.69, beating the analysts’ estimates for the adjusted earnings per share by 15 cents. The company had reported the adjusted revenue growth of 7 percent to $47.50 billion in the fourth quarter of FY 19, missing the analysts’ estimates for revenue of $47.57 billion. The membership fee income reported in the fourth quarter was $1.50 billion, up 5.3% over last year’s fourth quarter.

Comparable store sales, or those recorded at Costco’s e-commerce platform and warehouses open for more than a year, increased 5.1 per cent, excluding the impact of fuel and currency fluctuations. Analysts were projecting a 5.3 per cent rise, according to IBES data from Refinitiv. In the US, comparable store sales, excluding fuel, rose 5.2 per cent, also missed the analysts’ estimate of 5.3 per cent. Further, in terms of renewal rates, at Q4 end, the U.S. and Canada membership renewal rate came in at a 90.9%, up two-tenths of a percent from 90.7% as of the end of the last quarter. And worldwide, the renewal rate was 88.4%, up from 88.3% a quarter ago.

In the fourth quarter, the company had repurchased 52 million shares, 194,000 shares at an average price per share of $268.08. That brought the total year to 247 million shares, $247 million on 1.097 million shares at an average price of $225.16.

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