Costco Earnings Preview: Another Quarter of Growth Expected After Membership Fee Hike

Costco (COST) is expected to report another strong quarter. According to Bloomberg consensus estimates, Wall Street anticipates that the company’s fiscal fourth-quarter revenue will increase by 1.29% to $79.96 billion, with earnings per share rising 12.2% year-over-year to $5.69.

I believe that in the current somewhat sluggish consumer environment, Costco’s merchandising strategy, particularly the appeal of discounted gift cards, has recently driven a significant improvement in non-food categories. I expect Costco's same-store sales to grow by 6.4%, with e-commerce projected to jump by 19.63%.

Furthermore, I think Costco is clearly gaining market share, with consistent traffic growth and a faster recovery in general merchandise sales compared to its competitors. Data shows that Costco’s foot traffic surged by 10.5% in August, while the superstore and wholesale club sector overall saw a 4.9% increase.

I believe that Costco’s first membership fee hike since June 2017 is a key factor. Effective September 1, Costco’s Gold Star membership increased by $5 to $65, while the Executive membership rose by $10 to $130. This change is expected to affect around 52 million memberships, over half of which are Executive memberships, and is anticipated to drive membership fee income growth in the high single to low double digits.

Additionally, I observe that the company’s stock price has been steadily rising near its 21-day moving average. I believe it is highly likely that the stock will break to new highs in the near future.