10-QPeriod: Q1 FY2023

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q1 Ended Nov 20, 2022

Filed December 29, 2022For Securities:COST

Summary

Costco Wholesale Corporation reported solid financial results for the first quarter of fiscal year 2023, ending November 20, 2022. Total revenue increased by 8% to $53.4 billion, driven by a 7% rise in comparable sales and the opening of 22 new warehouses. Membership fees saw a healthy 6% increase to $1 billion, reflecting growth in member sign-ups and upgrades to Executive memberships. Despite a 45 basis point decrease in gross margin percentage, largely due to a charge related to downsizing charter shipping activities and a slight increase in core merchandise categories, the company demonstrated strong operational efficiency. Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased by 35 basis points, benefiting from a prior year's IT asset write-off and leveraging increased sales. Diluted earnings per share rose to $3.07 from $2.98 in the prior year's comparable period, indicating continued profitability and effective cost management.

Financial Highlights

49 data points
Beta

Revenue

$54.44B

12.2% Gross Margin

Net Income

$1.36B

2.5% Net Margin

EPS (Diluted)

$3.07

Total Assets

$66.03B

Cash & Equivalents

$10.86B

Free Cash Flow

$1.55B

Financial Statements
Beta
Revenue$54.44B
Cost of Revenue$47.77B
Gross Profit$6.67B
SG&A Expenses$4.92B
Operating Income$1.75B
Interest Expense$34.00M
Net Income$1.36B
EPS (Basic)$3.07
EPS (Diluted)$3.07
Shares Outstanding (Basic)443.84M
Shares Outstanding (Diluted)444.53M

Key Highlights

  • 1Total revenue reached $53.4 billion, an 8% increase year-over-year, fueled by comparable sales growth of 7% and contributions from new warehouse openings.
  • 2Membership fee revenue grew by 6% to $1 billion, demonstrating sustained member loyalty and value proposition.
  • 3Diluted earnings per share (EPS) increased to $3.07, up from $2.98 in the prior year's quarter, showcasing improved profitability.
  • 4Gross margin percentage saw a slight decline of 45 basis points to 10.61%, primarily due to a $93 million charge related to downsizing charter shipping activities and impacts in core merchandise categories.
  • 5SG&A expenses as a percentage of net sales decreased by 35 basis points, reflecting operational efficiencies and leveraging sales growth.
  • 6The company repurchased approximately $141 million worth of common stock during the quarter, indicating a commitment to returning capital to shareholders.
  • 7Cash flow from operations remained robust, providing $2.61 billion in the quarter, supporting ongoing investments and financial flexibility.

Frequently Asked Questions

Costco's total revenue increased by 8% to $53.4 billion, primarily driven by a 7% increase in comparable sales and the addition of 22 new warehouses since the prior year's comparable quarter. Higher gasoline prices also contributed positively to net sales.

The gross margin percentage decreased by 45 basis points. This was mainly due to a $93 million charge related to downsizing charter shipping activities, as well as a decrease in core merchandise categories. These factors were partially offset by strong performance in warehouse ancillary and other businesses, including gasoline.

Costco demonstrated effective expense management, with Selling, General, and Administrative (SG&A) expenses decreasing by 35 basis points as a percentage of net sales. This improvement was aided by a prior year's write-off of information technology assets and the leveraging of increased sales, contributing to overall operational efficiency.

For fiscal year 2023, Costco anticipates capital expenditures of approximately $3.8 billion to $4.0 billion, intended to be financed by cash from operations and existing investments. The company opened 8 new warehouses in the first quarter and plans to open an additional 19 new warehouses in the remainder of fiscal 2023.