How did Costco perform in the second quarter of fiscal 2024?

Costco grew net sales 5.7% to $57.33 billion and total revenue to $58.44 billion. Operating income rose to $2.06 billion, and diluted EPS was $3.92 versus $3.30 a year earlier. Results were helped by a $0.21 per share tax benefit related to the special dividend, and the calendar shift reduced sales growth by about 1.5 points.

What was the impact of the special dividend on Costco's financials?

The $15 per share special dividend, paid in the first half of fiscal 2024, cut cash and cash equivalents from $13.7 billion to $9.1 billion and reduced retained earnings and total equity sharply. Cash dividend payments totaled $8.0 billion for the 24 weeks. The dividend also created a tax benefit of $94 million for the quarter because it was deductible to the extent received by 401(k) plan participants.

Is Costco's growth being driven by e-commerce or the warehouse business?

Both contributed. E-commerce comparable sales grew 18.4% in the quarter and 12.2% year to date, well above total company comps of 5.6%. Warehouse comparable sales also grew, with U.S. comps at 4.3%, Canada at 9.2%, and Other International at 8.6%, and the company operates 875 warehouses worldwide.

Did Costco's cash flow and debt position change materially?

Operating cash flow was $5.38 billion for 24 weeks, down from $5.80 billion. Capital expenditures were $2.07 billion, and the company issued $498 million of long-term debt, bringing long-term debt (excluding current portion) to $5.87 billion from $5.38 billion. Total debt remains modest relative to the business, but cash on hand declined significantly after the dividend.

Why do the reported and adjusted comparable sales figures differ?

Adjusted comparable sales exclude the effects of changes in gasoline prices and foreign exchange rates. For example, total company comps were 5.6% reported versus 5.8% adjusted for the quarter, and 4.7% versus 4.8% for the first 24 weeks. Management presents both to show underlying demand trends apart from fuel price and currency movements.

COST 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed March 7, 2024. Cited figures are marked; the original filing is the authoritative source.

Costco reported second-quarter fiscal 2024 results (twelve weeks ended February 18, 2024) that showed solid top-line growth and higher profitability.

Net sales rose 5.7% to $57.33 billion^a, and total revenue reached $58.44 billion, up from $55.27 billion. Total company comparable sales grew 5.6% as reported (5.8% excluding gasoline prices and foreign exchange), and e-commerce comparable sales jumped 18.4%. Operating income increased 8.4% to $2.06 billion, and membership fees rose 8.2% to $1.11 billion.

Management said the fiscal calendar shift (last year's 53rd week) reduced quarterly net sales growth by roughly 1.5 percentage points. Quarterly net income was $1.74 billion^b, or $3.92 per diluted share, versus $3.30 last year. The result includes a $94 million ($0.21 per share) tax benefit tied to the $15 per share special dividend paid to 401(k) plan participants, so underlying growth is somewhat lower than the headline figure.

For the first 24 weeks, net income was $3.33 billion^c ($7.49 per diluted share), compared with $2.83 billion ($6.37) a year earlier. February sales (four weeks ended March 3, 2024) reached $18.21 billion, up 6.9%, with comparable sales of 5.0%. The balance sheet and cash flow reflect the approximately $8.0 billion special dividend paid during the period.

Cash and equivalents fell from $13.7 billion to $9.1 billion^d, retained earnings dropped from $19.5 billion to $15.0 billion, and total equity declined to $20.8 billion from $25.1 billion. Long-term debt increased to $5.9 billion after a $498 million debt issuance, and operating cash flow fell to $5.38 billion from $5.80 billion. Capital expenditures of $2.07 billion continued to support expansion, and the company operated 875 warehouses worldwide at quarter end.

02—Key points

Key Highlights

Q2 FY2024 net sales increased 5.7% to $57.33 billion; total revenue rose to $58.44 billion, with the fiscal calendar shift weighing on growth by about 1.5 points.
Total company comparable sales rose 5.6% (5.8% adjusted for gasoline and FX), with U.S. comps at 4.3%, Canada at 9.2%, and Other International at 8.6%.
E-commerce comparable sales grew 18.4% in the quarter, a strong indicator of digital channel momentum.
Q2 diluted EPS was $3.92 versus $3.30, including a $0.21 one-time tax benefit from the deductibility of the $15 special dividend paid to 401(k) participants.
Membership fees rose 8.2% to $1.11 billion and operating income grew 8.4% to $2.06 billion in the quarter.
The roughly $8.0 billion special dividend drove cash down to $9.1 billion, reduced equity to $20.8 billion, and raised long-term debt to $5.9 billion.
February sales grew 6.9% to $18.21 billion, with 26-week net sales up 6.1% to $123.15 billion.

03—Questions

Frequently Asked Questions

How did Costco perform in the second quarter of fiscal 2024?
Costco grew net sales 5.7% to $57.33 billion and total revenue to $58.44 billion. Operating income rose to $2.06 billion, and diluted EPS was $3.92 versus $3.30 a year earlier. Results were helped by a $0.21 per share tax benefit related to the special dividend, and the calendar shift reduced sales growth by about 1.5 points.
What was the impact of the special dividend on Costco's financials?
The $15 per share special dividend, paid in the first half of fiscal 2024, cut cash and cash equivalents from $13.7 billion to $9.1 billion and reduced retained earnings and total equity sharply. Cash dividend payments totaled $8.0 billion for the 24 weeks. The dividend also created a tax benefit of $94 million for the quarter because it was deductible to the extent received by 401(k) plan participants.
Is Costco's growth being driven by e-commerce or the warehouse business?
Both contributed. E-commerce comparable sales grew 18.4% in the quarter and 12.2% year to date, well above total company comps of 5.6%. Warehouse comparable sales also grew, with U.S. comps at 4.3%, Canada at 9.2%, and Other International at 8.6%, and the company operates 875 warehouses worldwide.
Did Costco's cash flow and debt position change materially?
Operating cash flow was $5.38 billion for 24 weeks, down from $5.80 billion. Capital expenditures were $2.07 billion, and the company issued $498 million of long-term debt, bringing long-term debt (excluding current portion) to $5.87 billion from $5.38 billion. Total debt remains modest relative to the business, but cash on hand declined significantly after the dividend.
Why do the reported and adjusted comparable sales figures differ?
Adjusted comparable sales exclude the effects of changes in gasoline prices and foreign exchange rates. For example, total company comps were 5.6% reported versus 5.8% adjusted for the quarter, and 4.7% versus 4.8% for the first 24 weeks. Management presents both to show underlying demand trends apart from fuel price and currency movements.

04—Continue

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