Costco Tops Profit Expectations Amid Pandemic-Fueled Sales Gains

(Bloomberg) -- Costco Wholesale Corp. topped Wall Street’s profit expectations during the first quarter amid continued high demand for food and supplies, even as the warehouse chain said pandemic-related costs remain elevated.

• Profit climbed to $2.62 a share in the period ended Nov. 22, the company said Thursday in a statement. Analysts had expected $2.06 on average, according to estimates compiled by Bloomberg.

Key Insights

• Costco has seen steady demand as consumers stock up on bulk food, along with electronics and goods for the home. Despite signs the pantry-loading trend may wane with a Covid vaccine, the pandemic has been a boon for large retailers and warehouse clubs, including Costco, that carry quarantine-friendly items such as shelf-stable canned goods and rice.
• Sales from membership fees climbed 7.1% in the quarter. Since Costco releases net sales figures on a monthly basis, investors tend to look at this measure during quarterly reports as a performance gauge.
• The company incurred $212 million in costs during the quarter related to higher wages during the pandemic. Costco said earlier this year it would pay employees an extra $2 an hour, and has been incurring higher expenses related to e-commerce, too. The gross margin was 13.3% in the period, compared with analysts’ estimate of 11.15%.

Market Reaction

• The shares rose less than 1% after regular trading in New York. Costco climbed 27% this year through Thursday’s close, roughly double the gain of the S&P 500 Index.

©2020 Bloomberg L.P.