10-QPeriod: Q2 FY2024

COSTCO WHOLESALE CORP /NEW Quarterly Report for Q2 Ended Feb 18, 2024

Filed March 13, 2024For Securities:COST

Summary

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 billion, 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 billion, 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.

Financial Highlights

49 data points
Beta

Revenue

$58.44B

12.5% Gross Margin

Net Income

$1.74B

3.0% Net Margin

EPS (Diluted)

$3.92

Total Assets

$66.32B

Cash & Equivalents

$9.10B

Free Cash Flow

-$300.00M

Financial Statements
Beta
Revenue$58.44B
Cost of Revenue$51.14B
Gross Profit$7.30B
SG&A Expenses$5.24B
Operating Income$2.06B
Interest Expense$41.00M
Net Income$1.74B
EPS (Basic)$3.93
EPS (Diluted)$3.92
Shares Outstanding (Basic)443.89M
Shares Outstanding (Diluted)444.75M

Key Highlights

  • 1Total revenue for the 12 weeks ended February 18, 2024, increased by 6% to $57.33 billion compared to the same period last year.
  • 2Comparable sales grew by 6% for the quarter, indicating strong underlying business momentum.
  • 3Membership fee revenue saw an 8% increase, reaching $1.11 billion, highlighting member loyalty and retention.
  • 4Net income for the quarter rose to $1.74 billion, a significant increase from $1.47 billion in the prior year's quarter.
  • 5Diluted earnings per share (EPS) improved to $3.92, up from $3.30 in the comparable prior-year period.
  • 6The company paid a substantial special cash dividend of $15.00 per share in January 2024, impacting cash and retained earnings.
  • 7Cash flow from operations remained strong at $5.38 billion for the first half of the fiscal year, supporting investments and shareholder returns.

Frequently Asked Questions

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.

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.

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.

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.