Costco tops estimates, shares get 3%bump

Warehouse club operator Costco Wholesale Corp. reported a better-than-expected quarterly profit on Thursday, benefiting from an increase in online sales, sending its shares up three per cent in extended trading.

Costco has managed to attract more online shoppers by sprucing up its website with everything from Apple Macbooks to La Mer cosmetics, as well as adding sameday delivery for groceries.

Online comparable-store sales, excluding the impact of fuel price and currency changes, rose 25.5 per cent in the second quarter ended Feb. 17.

Net income attributable to the company rose to US$889 million, or US$2.01 per share, from US$701 million, or US$1.59 per share, a year earlier. Analysts on average had expected a profit of US$1.69 per share, according to IBES data from Refinitiv.

However, the company’s total revenue rose seven per cent to US$35.4 billion, but below analysts’ forecast of US$35.67 billion.

Same-store U.S. sales excluding gas rose 7.2 per cent in the second quarter, beating estimates, while gross profit margins expanded.

Costco is the big dog in the U.S. warehouse-club market, but its rivals are gaining some ground.

Shares of smaller rival BJ’S Wholesale Club Holdings Inc. have risen about 13 per cent this year and it just reported its best-ever membership renewal rate, giving it the confidence to raise its annual fee.

Sam’s Club, owned by Walmart Inc., has posted 12-straight quarters of comparable-store sales gains thanks to improvements in fresh food and private label goods, as well as new technologies that help get shoppers through the store faster.

Costco hasn’t been standing still: It added a line of Apple laptop and desktop computers just in time for the holiday season, has expanded its same-day grocery delivery service to cover most of the U.S. and will open its first store in China later this year.