Costco Wholesale Corporation (NASDAQ:COST) appears to be navigating the apocalypse in the retail sector with ease. The company’s first-quarter results trouncing estimates and exceeding expectations attest to a company firing on all cylinders. This contrasts with some retailers that have had to close shops on store traffic declining to levels never seen before.
Earnings Beat
The ability to continue attracting new members by offering a broad range of high-quality merchandise at low prices is a tactic that has allowed the retailer to stay afloat amid the challenging macro-environment. In addition to attracting new members with exciting deals, the retailer has also seen its comps improve over the years. Year to date, Comps are already up 8%, helping drive profitability up.
In the most recent quarter, revenues were up 17% to $43.2 billion at a time when retailers are crying foul over a reduction in store traffic hurting sales. Comparable store sales, on the other hand, rose 15%. Costco's earnings growth trajectory remained intact, with net income increasing 38% to $1.17 billion or $2.62 a share.
Revenue growth in the quarter can be attributed to, among other things, Costco benefiting from stockpiling behavior among customers. Customers continued to stockpile essential items for fear of extended lockdowns are owing to the second wave of the COVID-19 pandemic.
E-Commerce Impact
However, the increased focus on e-commerce appears to be strengthening the company’s revenue base. Costco's comparable online sales were up 86% in the quarter, helping shrug off losses in brick and mortar.
With over 558 warehouses spread across the U.S and in key population areas, Costco has been able to ramp up its e-commerce operations in response to most customers resorting to online shopping. The retailer maintaining a small international presence with 245 outlets spread across some of the biggest economies also helped strengthen the revenue base.
Costco stock has been powering high for the better of the year as investors remain impressed with the robust sales and profitability amid the pandemic. The company keeping its dividend program intact, has also continued to strengthen sentiments in the stock.