01—Abstract
Summary
Summary of the 10-Q filed March 13, 2024. Cited figures are marked; the original filing is the authoritative source.
Costco Wholesale Corporation's (COST) fiscal second quarter results for the period ending February 18, 2024, demonstrate continued top-line growth and solid profitability.
Total revenue increased by 6% year-over-year to $58.44 billiona, driven by a 6% rise in comparable sales and contributions from newly opened warehouses. Membership fee revenue also saw a healthy 8% increase, signaling strong member loyalty and potential for increased lifetime value. The company maintained its competitive pricing strategy, which, while impacting gross margin percentage slightly, contributed to strong sales volumes.
Net income grew to $1.74 billionb, or $3.92 per diluted share, up from $1.47 billion, or $3.30 per diluted share in the prior year's quarter. The balance sheet remains robust, though total assets decreased slightly due to a reduction in cash and cash equivalents, largely attributed to the significant special dividend payment.
The company's commitment to returning capital to shareholders is evident through substantial dividend payments and ongoing share repurchase programs. While facing typical retail challenges such as rising operating costs and competitive pressures, Costco's membership model and operational efficiency continue to drive resilient financial performance.
02—Key points
Key Highlights
- Total revenue for the 12 weeks ended February 18, 2024, increased by 6% to $57.33 billion compared to the same period last year.
- Comparable sales grew by 6% for the quarter, indicating strong underlying business momentum.
- Membership fee revenue saw an 8% increase, reaching $1.11 billion, highlighting member loyalty and retention.
- Net income for the quarter rose to $1.74 billion, a significant increase from $1.47 billion in the prior year's quarter.
- Diluted earnings per share (EPS) improved to $3.92, up from $3.30 in the comparable prior-year period.
- The company paid a substantial special cash dividend of $15.00 per share in January 2024, impacting cash and retained earnings.
- Cash flow from operations remained strong at $5.38 billion for the first half of the fiscal year, supporting investments and shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Costco Wholesale Corp kept $0.03.
- Revenue$58.44B100.0%
- Cost of revenue−$51.14B87.5%
- Gross profit$7.30B12.5%
- Operating costs−$5.24B9.0%
- Operating income$2.06B3.5%
- Interest, other & tax−$319.0M0.5%
- Net income$1.74B3.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed March 13, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $58.44B$55.27B | +5.7% |
| Cost of Revenue | $51.14B$48.42B | +5.6% |
| Gross Profit | $7.30B$6.84B | +6.7% |
| SG&A Expenses | $5.24B$4.94B | +6.1% |
| Operating Income | $2.06B$1.90B | +8.4% |
| Interest Expense | $41.00M$34.00M | +20.6% |
| Net Income | $1.74B$1.47B | +18.9% |
| EPS (Basic) | $3.93$3.30 | +19.1% |
| EPS (Diluted) | $3.92$3.30 | +18.8% |
| Shares Outstanding (Basic) | 443.89M443.88M | 0.0% |
| Shares Outstanding (Diluted) | 444.75M444.48M | +0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Costco's revenue growth in the second quarter?
Costco's revenue growth was primarily driven by a 6% increase in comparable sales and the contribution from 26 net new warehouses opened since the end of the prior year's second quarter. This indicates consistent performance from existing stores and expansion into new markets.
How did the special cash dividend declared in December 2023 impact the company's financials?
The special cash dividend of $15.00 per share, totaling approximately $6.66 billion paid in January 2024, significantly impacted the company's cash position and retained earnings. This also led to a notable decrease in cash and cash equivalents on the balance sheet and a substantial outflow in financing activities, contributing to the lower overall cash balance compared to the prior fiscal year-end.
What is the outlook for Costco's membership fees?
Membership fee revenue increased by 8% year-over-year, reaching $1.11 billion for the quarter. This growth was attributed to new member sign-ups, upgrades to Executive Membership, and a high renewal rate (92.9% in the U.S. and Canada, 90.5% worldwide). The company expects continued strength in this recurring revenue stream.
Are there any significant legal or contingent liabilities that investors should be aware of?
Costco is involved in various legal proceedings, including class-action lawsuits related to wage and hour claims, privacy violations, and other matters. While the company states that it does not believe any pending litigation, individually or in aggregate, will have a material adverse effect on its financial position, results of operations, or cash flows, it's possible that an unfavorable outcome could result in a charge material to a specific fiscal quarter or year. Investors should monitor these disclosures for any material developments.
06—Continue