Costco Year End Results Top Expectations

Costco just released its 53-week year-end report, and it showed excellent results. Fourth Quarter revenue increased +9.6% to $78.9 billion, and the full year revenues increased +6.8% to $224 billion. Income for the fourth quarter increased +2.02% to $2.2 billion ($4.86 per diluted share), and for the full year it increased +7.8% to $14.18 per diluted share.

Total comparable warehouse sales increased +1.1% in the 17 weeks of the fourth quarter, and they increased +3.0% for the full year, (which had 53 weeks). Of note, all figures were compared to a like number of weeks in 2022.

There were several factors that contributed to the excellent results. The company experienced lower inflation in the quarter; management pegged it at 1% to 2%. In the previous quarter, management pegged the inflation rate at 3% to 4%. Contributing to the lower inflation rate were several factors, including lower transportation costs, lower LIFO costs (223 basis points last year and only 27 basis points this year), lower gasoline costs, and lower egg costs while overall fresh food prices were flat.

The company will open 10 warehouses in the first quarter of fiscal 2024, 9 stores will open in the U.S. and 1 unit will be added in Canada. There were 9 units opened in the fourth quarter of 2023, of which 5 stores were in the U.S., 2 were in China, 1 was in Japan, and 1 was in Australia. Currently Costco has 861 warehouses, including 591 in the U.S. and Puerto Rico. In addition, there are now 107 warehouses in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 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.

E-commerce sites operate in the U.S., Mexico, Korea, Taiwan, Japan, and Australia. E-commerce business dropped -0.8% in the final quarter and -5.7% in the full 53-week year. Management indicated that the e-commerce sales will improve this year since new internet initiatives are being taken.

POSTSCRIPT: During the investors’ conference call, EVP and CFO
CFO
Mr. Richard Galanti spoke at length about management’s commitment to its associates and the plans for the future. Yes, there will be a special dividend at an unspecified time. Gasoline prices have come down a bit, and could come down some more, despite the recent curtailment of supply by Saudi Arabia.