By Ananya Maryam Rajesh
(Reuters) – Wholesaler Costco topped Wall Street estimates for quarterly results on Thursday, helped by strong demand for fresh food, sweets and fuel offerings despite rising inflation.
However, the company’s gross margins narrowed for the said quarter as it battled rising shipping and labor costs due to rising inflation and global supply chain hurdles, sending its shares down about 3% in extended trading.
Costco (NASDAQ 🙂 is benefiting from strong spending by affluent Americans with club memberships even as lower-income consumers spend less, weighed down by higher prices for everything from edible oils to gas due to the Ukraine war and supply chain disruptions.
Strong quarterly results for the membership-only retail chain come at a time targeting Corp (NYSE:) reported a decline in quarterly profit as consumers due to higher prices cut back spending on non-essential items.
Joseph Feldman, an analyst at Telsey Advisory Group, said that in the current environment, consumers are looking to save money – including the wealthy, who are served by Costco. “This bodes well, because they sell a lot of food and consumables and help people save money.”
However, Costco’s total inventory at the end of the fourth quarter was up 26% year over year as the company switched to promoting as major US retailers Walmart (NYSE:) Inc and Target.
“Initial seasonal sales appear to be going well…We expect the 26% annual increase to start to decline as it has in the past few weeks a bit,” Chief Financial Officer Richard Galanti said on an earnings call.
The large retailer’s total revenue rose 15% to $72.10 billion in the fourth quarter, topping estimates of $72.04 billion, according to IBES data from Refinitiv.
Excluding items, Costco earned $4.20 per share, beating estimates of $4.17 per share.
The company’s reported gross profit margin came in at 10.18%, compared to 10.92% a year earlier.