Costco cites weak e-commerce growth for missing analysts’ estimate for revenue in the first quarter

Costco cites weak e-commerce growth for missing analysts’ estimate for revenue in the first quarter
Written by:
Michael Harris
14th December 2019
Updated: 11th March 2020
  • Costco announces a sharp decline in e-commerce sales in the first quarter.
  • Costco notes $1.73 of earnings per share against the experts' forecast of $1.72 in Q1.
  • Costco records net income at $844 million in Q1, marking 10% growth year over year.
  • Costco has performed well in the stock market in 2019 so far.

The American multinational corporation, Costco Wholesale, announced its quarterly earnings report on Thursday. Having missed the analysts’ estimate for revenue due to poor e-commerce growth, the stock was reported trading lower in extended trading on Thursday. Costco manages a chain of warehouse clubs (membership only).

Costco Announces A Sharp Decline In E-Commerce Sales In The First Quarter

Costco spokesperson cited late Thanksgiving in 2019 to have contributed to hurting the overall sales in the first quarter. In the previous two quarters, Costco Wholesale Corporation had noted 26.2% and 21.9% growth in e-commerce sales respectively. In the first quarter, however, the company printed only a 5.7% rise in e-commerce sales that came as a huge disappointment for the overall quarterly performance of Costco.

Sources also reported that following the end of Q1 on November 24th, Costco’s website was seen unavailable for a while during Thanksgiving. According to analyst Brian Yarbrough of Edward Jones, Costco is lagging behind in taking e-commerce as seriously as the major competitors like Walmart and Target do. He further added that the expectations regarding e-commerce sales are higher in the digital era. When comparable sales fail to grow at 20% or more, investors are likely to be disappointed.

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Other Noticeable Figures In The Q1 Earnings Report

Excluding the potential effect of fluctuations in gas prices and currency at large, Costco, however, recorded a 5% growth in comparable sales. In a previous estimate, analysts had forecast a 4.95% growth in comparable sales for the company in the first quarter.

Based on the Refinitiv’s survey, experts were anticipating $1.72 of earnings per share for Costco in its Q1 earnings report. Noting a slightly higher $1.73 per share, the company beat the analysts’ estimate for EPS.  

Total quarterly revenue also grew by 5.6% as compared to the same quarter last year. At $37.04 billion, however, it was reported shy of the analysts’ estimate of $37.25 billion in the first quarter. The year over year growth in net income was highlighted at 10% ($844 million) in the Q1 earnings report.

The overall performance for Costco in the stock market has remained largely upbeat in 2019 so far. Share prices were reported at around $205 at the start of the year. The stock printed a year-to-date high of $305 in November. Sustaining much of the gains, it is currently settling around $290, after falling from $297 on Thursday, following the performance results. The stock has traded above the opening level in 2019. Costco currently has a market cap of $128.94 billion and price to earnings ratio of 34.61.

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