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Stock Markets Finish Mixed; Costco, Lululemon Weigh In After Hours

By Dan Caplinger - Dec 10, 2020 at 6:16PM

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The latest earnings reports from these two giants tell something about the current retail environment.

Thursday was another up-and-down day for the stock market, as major market benchmarks ended up finishing mixed once again. Gains for the Nasdaq Composite came as little surprise to those who have seen the index recover from momentary setbacks countless times in 2020. Modest declines for the Dow Jones Industrial Average and the S&P 500 index represented further pauses from the bull market.

Index

Percentage Change

Point Change

Dow ( ^DJI )

(0.23%)

(70)

S&P 500                ( ^GSPC -0.84% )

(0.13%)

(5)

Nasdaq Composite ( ^IXIC 0.00% )

0.54%

67

Data source: Yahoo! Finance.

The height of earnings season was more than a month ago, but there are still some influential companies weighing in with their latest financial reports. After the bell, Costco Wholesale ( COST 0.65% ) and lululemon athletica ( LULU -3.32% ) gave their latest readings on how their respective businesses are doing, and investors were eager to get a sense of what the retail environment is like heading into the homestretch of the holiday season.

Costco sees sales soar

Costco Wholesale shares moved modestly lower during the regular trading session. The warehouse retailer released fiscal first-quarter results after the bell, pushing the stock up about 0.5% as of 5:30 p.m. EST.

Costco saw net sales climb almost 17% from year-ago levels, with comparable sales rising 15.4%. Growth in comps was similar across Costco's geographical footprint after adjusting for foreign exchange rates and gasoline sales. The company continued to see massive gains in its e-commerce channel, with online sales jumping 86% year over year.

Net income surged 38% to $2.62 per share, although some of the gains came from an extraordinary tax benefit resulting from Costco's recent $10 per-share special dividend. However, the retailer also said that it incurred a roughly $0.35 per-share hit from higher wages that it is paying employees during the COVID-19 pandemic.

Costco has shown strength throughout the pandemic, and the stock has enjoyed solid returns during 2020. All signs point to continued consistent success for Costco in the year ahead.

Six people on yoga mats in lotus pose.

Image source: Getty Images.

Lululemon limbers up

Elsewhere, shares of Lululemon fell roughly 1.5% after hours after the company posted a 1.5% gain during the regular session. The yoga apparel retailer continued to show solid growth, although perhaps not at quite the pace that optimistic shareholders had hoped to see.

Lululemon reported a 22% year-over-year rise in revenue in the third quarter, with comparable sales climbing 19%. Direct-to-consumer sales soared 94%, helping to offset COVID-19-related sluggishness in Lululemon's store base. Store-based comps fell 17% year over year.

Profits rose at Lululemon, with net income climbing 21%. That produced adjusted earnings of $1.16 per share, which was slightly ahead of what most of those following the stock had expected.

In a move few companies have made, Lululemon boosted its stock buyback authorization to $500 million. Moreover, news that the company will terminate a credit facility points to the notion that Lululemon is quite secure with its liquidity position.

Nervousness about the pandemic hasn't held Lululemon's stock back this year, and even this evening's modest declines aren't making a big dent in shareholder returns. Lululemon's core business looks strong, and that should produce solid performance into 2021 and beyond.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$528.93 (0.65%) $3.42
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,538.43 (-0.84%) $-38.67
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$15,381.32 (0.00%) $0.00
Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$435.72 (-3.32%) $-14.96

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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