Categories Analysis, Consumer

After entering FY24 on a high note, Costco is all set to report Q2 results

The company's stock reached a new record high this week, after gaining steadily in recent months

Costco Wholesale Corporation (NASDAQ: COST) stands out in the retail space for its unique business model that enables the warehouse behemoth to grow store traffic and market share constantly. Currently, the company is busy expanding its e-commerce footprint and looks on track to join others like Walmart.

Stock Peaks

COST has been one of the top-performing Wall Street stocks, gaining a whopping 57% in the past twelve months. The uptrend continued in 2024 and the stock climbed to an all-time high this week. Costco has a good track record of rewarding shareholders through special dividends, with the latest being the $15/share dividend it announced in December.

The company’s commitment to returning value to shareholders is the main factor that makes it a preferred investment option for income investors, compared to most other retail stocks. After the recent rally, the stock is likely to level off in the coming weeks but it has the potential to continue the upswing in the foreseeable future.

Q2 Report on Tap

The Issaquah-headquartered company will be publishing second-quarter 2024 results on Thursday, March 7, at 4:15 p.m. ET. On average, analysts forecast earnings of $3.62 per share for Q2, compared to $3.3 per share in the same period of the previous fiscal year. The consensus revenue estimate is $59.16 billion.

Last year, customer traffic at Costco stores increased faster than the industry average, as the low prices continued to attract budget-conscious customers who are always on the lookout for better deals. The membership-only business model has been successful, with new signups and renewals growing steadily. The company will be adding around 30 new stores to its extensive network in the domestic market this year, due to the high demand.

Costco’s CFO Richard Galanti said at the Q1 earnings call, “For Q2 fiscal ’24, we plan four new locations, including our sixth building in China early in the calendar year. Regarding capital expenditures, the first-quarter capital expenditure spend was approximately 1.04 billion. We estimate that fiscal ’24 capex will be in the $4.4 billion to $4.6 billion range. That’s up from 4.3 billion we had in fiscal ’23, reflecting a continued increase in the number of the expansion that we’re doing.”

Strong Q1

In the first quarter, both earnings and revenue exceeded analysts’ estimates, marking the second beat in a row. Comparable store sales growth accelerated for the second consecutive quarter, with sales growing across all geographical segments and the e-commerce channel. First-quarter revenue moved up 6% annually to $57.8 billion, which translated into a 17% jump in profit to $1.59 billion or $3.58 per share.

In the past three years, the value of Costco’s shares more than doubled, and they stayed above the 12-month average in recent months. The stock traded slightly higher on Thursday afternoon.

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