These are happy days if you are a Costco shareholder. Not only are stocks up just over 40% in the year to date as the warehouse membership retailer continues to see sales soar, but Santa Costco is poppig down the chimney with something extra.
Yes, Costco shareholders received an early, if not entirely unexpected, Christmas present this week as Chief Financial Officer Richard Galanti’s strong hints that a special dividend was coming were finally confirmed.
Amid an upbeat trading announcement Thursday, Costco confirmed that it would pay a special cash dividend of $15 per share on January 12, 2024 to ‘shareholders of record’ at close of business on December 28. This will come on top of the quarterly dividend the company has already pledged.
This will be Costco’s fifth-ever special dividend. Previously paid out in 2012, 2015, 2017, and 2020 for the sums of $7, $5, $7, and $10 respectively, this latest payment of $15 in 2024 is its biggest yet. The aggregate amount of the payment will be approximately $6.7 billion.
The news came amid a bullish outlook for the retailer. Costco’s figures showed double-digit year-over-year earnings-per-share growth, plus higher profits in its fiscal first-quarter, with same-store sales holding up well for the warehouse retail giant.
While the earnings release did not make mention of a much-anticipated membership-fee increase (which starts at $60 a year and was last raised in 2017), for the first quarter, the company reported net sales of $56.72 billion. That was an increase of 6.1% from $53.44 billion for the first quarter of fiscal year 2023, ending November 20, 2022.
Costco Sales Soar
Sales in the quarter were helped by growing demand for the company’s groceries and essentials. However, continued strong growth in membership fees also helped. Membership fee revenue rose more than 8%, outpacing net sales growth by 2 percentage points.
“We’re looking at the consumer through somewhat rose-colored glasses,” said Galanti during the retailer’s quarterly earnings call as he noted that while Costco believes that the prices it offers is what makes the difference website enhancements and evolving communication strategies have also played a role.
Galanti also highlighted positive membership trends, with renewal rates at 92.8% in the U.S. and Canada, and 90.5% worldwide. Q1 concluded with 72 million paid household members, a 7.6% year-on-year increase, and 129.5 million cardholders, up by 7.1%. Executive members, representing over 46% of paid members, contributed to over 73% of worldwide sales.
Costco is continuing to expand and will be opening 10 locations in the coming quarter and 33 locations in fiscal year 2024.
Costco Leadership Change
Costco CEO Craig Jelinek, who took the helm in 2012 and led the warehouse retailer through the pandemic, will be stepping down at the end of this year, though he will continue to serve in an advisory role through April 2024. Stepping in to replace him on January 1 will be Ron Vachris, who started out as a forklift operator at Costco 40 years ago and currently serves as the company’s chief operating officer.
Jelinek and Vachris have been working together the past two years, and Costco called the move “the culmination of a long-standing succession plan” when it made the announcement in October.
Costco operates its business with a significant net cash position, which means it pays little in interest, keeping the company’s cost structure low in order to pass savings onto members. At the end of its fiscal first quarter, Costco had about $7 billion of debt and nearly $18 billion of cash, cash equivalents, and short-term investments.
Costco currently operates 871 warehouses, including 600 in the U.S. and Puerto Rico, 108 in Canada, 40 in Mexico, 33 in Japan, 29 in the UK, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
Costco also operates e-commerce sites, an increasing source of revenue for the retailer, in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
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