Profits At Costco Beat Expectations On Gold And Silver Sales

(CTN News) – Despite gold bars and warehouse-friendly prices on everyday essentials, Costco’s (COST) bottom line grew in the second quarter on the back of gold bars selling like hotcakes.

According to Bloomberg data, the wholesale club posted an adjusted earnings per share (EPS) of $3.92, which is a huge improvement over expectation of $3.62. According to data, the wholesale club posted a revenue of $58.44 billion, a 5.7% increase over last year, though slightly below expectations of $59.04 billion.

With the exception of gas and foreign exchange, same-store sales jumped 5.8% in the third quarter.

As expected, the US same-store sales growth came in higher than expected at 4.8%, compared to estimates of 4.7%. Same-store sales in Canada grew by 9%, beating estimates by a margin of 3%, while international stores posted an increase of 8.2%, beating estimates by a margin of 3%.

The CFO of Costco, Richard Galanti, said on a late Thursday conference call that digital sales increased by more than 18% compared to a year ago, driven by the strong demand for gold bars, silver, and appliances.

There was an increase in membership fees, one of the main revenue streams, which came in at $1.11 billion, compared to $1.03 billion a year earlier. It is also a big jump compared to the $1.08 billion that was brought in in Q1 of 2012.

The annual cost of a Gold Star membership at Costco is $60,

while the annual cost of an Executive Membership at Costco is $120. Last year, there were some on Wall Street who predicted that Costco would be raising their prices this summer.

On Friday, Costco shares fell 4.6% in premarket trading as Wall Street, taking a positive view of the stock at current levels, believed it was fairly valued.

As a result of the strong quarter, it is hard to see a catalyst for the next leg of growth at the current valuation, so we remain Neutral on the stock. The company is well positioned to continue to grow, however, the high multiple (29.0x 2024E EV/EBITDA) and crowded position of the company keep us neutral. Citi analyst Paul Lejuez said that “at current levels, we consider the risk/reward ratio to be balanced.”

Despite the fact that Costco stock is up about 55% over the past year, it has still managed to outperform the S&P 500’s gain of 29%.

It would make sense that Telsey Advisory Group would take a pause after the “stock has been on fire lately” and Feldman of Telsey Advisory Group told Yahoo Finance that it only “makes sense” that it would do so.

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