Why does Q4 net sales growth look so low at 1.0%?

The current quarter had 16 weeks while the prior-year comparable quarter had 17 weeks. Costco's supplemental data indicates normalizing for the extra week produces net sales growth of about 7.3%, which better reflects underlying performance.

How strong was the underlying sales performance excluding gasoline and currency effects?

Adjusted total company comparable sales rose 6.9% in Q4 and 5.9% for the full year, excluding changes in gasoline prices and foreign exchange. U.S. adjusted comps were 6.3% in Q4, and e-commerce adjusted comps were 19.5%.

Did the Q4 earnings include any one-time items?

Yes. Q4 included a net non-recurring tax benefit of $63 million, or $0.14 per diluted share, tied to a transfer pricing settlement and tax reserve true-ups. Excluding this and the extra prior-year week, Costco's net income and diluted EPS growth were about 12.7% and 12.6%.

Why did cash decline so sharply during fiscal 2024?

Cash and equivalents fell to $9.9B from $13.7B mainly because cash dividend payments totaled $9.04B in fiscal 2024, compared with $1.25B in fiscal 2023. Capital expenditures of $4.7B also contributed, partly offset by $11.3B of operating cash flow.

COST 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed September 26, 2024. Cited figures are marked; the original filing is the authoritative source.

Costco reported fourth-quarter and full-year fiscal 2024 results for the 16-week Q4 and 52-week year ended September 1, 2024.

Q4 net sales rose 1.0% to $78.2 billion^a, but this comparison is against a 17-week prior-year quarter; normalizing for the extra week, growth was 7.3%. Comparable sales were strong, with total company comps up 5.4% reported and 6.9% excluding gasoline and FX, and e-commerce comps up 18.9% (19.5% adjusted). Q4 diluted EPS was $5.29 versus $4.86, including a $63 million (about $0.14 per share) non-recurring tax benefit.

Full-year net sales grew 5.0% to $249.6 billion^b, net income reached $7.37 billion, and diluted EPS was $16.56 versus $14.16. Membership remains a core driver. Membership fee revenue was $1.51 billion in Q4, roughly flat on a reported basis due to the lost week, but normalized membership income grew 6.5%.

Paid memberships reached 76.2 million (up 7.3%), the worldwide renewal rate was 90.5%, and the U.S./Canada renewal rate was 92.9%. Operating income for the full year rose to $9.29 billion^c from $8.11 billion. Costco ended the year with 891 warehouses and plans to reach about 916 by end of fiscal 2025.

Balance-sheet and cash-flow items warrant attention. Cash fell to $9.9 billion^d from $13.7 billion, largely because cash dividend payments totaled $9.04 billion in fiscal 2024, including a special dividend, versus $1.25 billion a year earlier. Capital expenditures rose to $4.71 billion.

Operating cash flow was $11.3 billion, and long-term debt was modest at about $5.9 billion including current portion. The filing is a routine earnings disclosure under Item 2.02 and contains no new guidance beyond the warehouse expansion plan.

02—Key points

Key Highlights

Q4 FY2024 net sales were $78.2B, up 1.0% reported but 7.3% on a normalized basis after adjusting for the 17-week prior-year quarter.
Total company comparable sales rose 5.4% (6.9% excluding gasoline and FX) in Q4; full-year comps were 5.3% (5.9% adjusted).
E-commerce comparable sales grew 18.9% in Q4 and 16.1% for the full year, showing strong digital momentum.
Q4 diluted EPS was $5.29 (up about 8.8%), including a $0.14 non-recurring tax benefit; normalized EPS growth was about 12.6%.
Full-year net income rose to $7.37B and diluted EPS to $16.56 from $14.16, with operating income up to $9.29B from $8.11B.
Paid memberships reached 76.2M (up 7.3%) with a 90.5% worldwide renewal rate and 92.9% U.S./Canada renewal rate.
Cash dividends of $9.04B in fiscal 2024 (including a special dividend) drove cash down to $9.9B from $13.7B; capex rose to $4.7B.

03—Questions

Frequently Asked Questions

Why does Q4 net sales growth look so low at 1.0%?
The current quarter had 16 weeks while the prior-year comparable quarter had 17 weeks. Costco's supplemental data indicates normalizing for the extra week produces net sales growth of about 7.3%, which better reflects underlying performance.
How strong was the underlying sales performance excluding gasoline and currency effects?
Adjusted total company comparable sales rose 6.9% in Q4 and 5.9% for the full year, excluding changes in gasoline prices and foreign exchange. U.S. adjusted comps were 6.3% in Q4, and e-commerce adjusted comps were 19.5%.
Did the Q4 earnings include any one-time items?
Yes. Q4 included a net non-recurring tax benefit of $63 million, or $0.14 per diluted share, tied to a transfer pricing settlement and tax reserve true-ups. Excluding this and the extra prior-year week, Costco's net income and diluted EPS growth were about 12.7% and 12.6%.
Why did cash decline so sharply during fiscal 2024?
Cash and equivalents fell to $9.9B from $13.7B mainly because cash dividend payments totaled $9.04B in fiscal 2024, compared with $1.25B in fiscal 2023. Capital expenditures of $4.7B also contributed, partly offset by $11.3B of operating cash flow.
How healthy is Costco's membership base and renewal activity?
Costco had 76.2M paid memberships (up 7.3%) and 136.8M total cardholders (up 7.0%). The worldwide renewal rate was 90.5% and the U.S./Canada renewal rate was 92.9%, while 73.5% of sales came from executive members, indicating a stable and engaged membership base.

04—Continue

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