Yahoo Finance Costco’s Top Line Disappoints in 3Q16, but Growth Surpasses Peers
Earnings Analysis: Weighing in on Costco’s Fiscal 3Q16 Results
Fiscal 3Q16 revenue
Costco Wholesale (COST) reported revenue of $26.8 billion in fiscal 3Q16, an increase of 2.6% year-over-year. Its net sales (including fuel sales) were up by 2.5% to $26.2 billion in the quarter, and its membership income rose by 5.8% to $618 million. Fiscal 3Q16 refers to the 12-week period ended on May 8, 2016.
In contrast, sales at Walmart’s (WMT) warehouse club segment Sam’s Club rose by 1% to $13.6 billion (including fuel sales), with membership income rising by 3.9% in fiscal 1Q17. Walmart’s first quarter ended on April 30, 2016.
Citing a challenging consumer (XLP) (XLY) environment and the impact of the sale of the Pharmacy and Clinics business to CVS Health (CVS), sales at rival mass merchandiser Target (TGT) fell by 5.4% to $16.2 billion in fiscal 1Q17, which ended on April 30, 2016.
Costco, Walmart, Target, and CVS Health together make up 4.7% of the portfolio holdings in the SPDR S&P Retail ETF (XRT).
Growing retail footprint
Costco’s sales growth, to a large extent, was spurred by new warehouse (FXD) openings. The company operated a total of 705 warehouses at the end of fiscal 3Q16, compared to 673 warehouses at the end of fiscal 3Q15.
During the third quarter of the current fiscal year, Costco opened seven net new warehouses, including five in the US, and one each in Japan and Taiwan. The company also relocated one warehouse.
Slow growth in store comps
However, Costco’s revenue numbers missed the consensus Wall Street analysts’ estimate on lower-than-expected same-store sales growth. The next article discusses the factors that pulled down performance for the largest warehouse club chain in the US.
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