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5 Standout Metrics From Costco's Latest Earnings Report

By Demitri Kalogeropoulos - Mar 8, 2021 at 2:23PM

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The warehouse giant is coasting into the second half of fiscal 2021.

Costco (COST 2.87%) just closed out the first half of its fiscal year by reporting the same type of strong results that investors have come to expect from the warehouse retailer. Sales were lifted by pandemic demand through mid-February and by the chain's gathering market-share momentum in categories like home furnishings and consumer electronics.

Let's look at a few of the standout metrics from the fiscal Q2 report.

A man standing in a market aisle and holding several cartons of eggs.

Image source: Getty Images.

1. Market share

Revenue gains were robust, with comparable-store sales rising 13% after adjusting for gas price swings. That result stacked up well against most of Costco's national peers.

Walmart (WMT 3.11%) recently announced a 9% comps increase, and Kroger (KR 4.15%) notched an 11% boost to end fiscal 2020. Target (TGT -0.59%) set the pace for all major chains by logging a 21% sales spike over the holiday quarter, but Costco still enjoyed market-beating growth.

2. Customer traffic

Costco's growth came mostly from rising spending, with average shopper transactions jumping 9% in the core U.S. market. People continued to prioritize their warehouse trips over visits to other retailers, too. Customer traffic was up 3% while it fell at places like Walmart. But Target led the industry here again, with traffic jumping 13% in the holiday period.

3. Bacon sales

Management likes to highlight some unusual sales trends in its earnings breakdown, and this time around it was bacon that got the shout-out. Demand for the product is up 45% in recent weeks, causing shortages in some parts of the country.

Costco also had trouble meeting the demand for exercise equipment, bikes, and lawn and garden furnishings. Yet the chain for the most part kept aisles full through surging volumes. "Our buying teams have done a great job keeping our buildings in stock despite outsized demand and some supply chain challenges," CFO Richard Galanti told investors.

4. Renewal rates

Along with customer traffic, Costco's renewal rate reflects shoppers' loyalty to the retailer. There's no issue in this arena. In fact, the renewal rate ticked up to a near-record 91%, compared to 90.9% three months earlier. For context, BJ's Wholesale (BJ 5.13%) attracts an 87% renewal rate.

The shopper loyalty translated directly into higher earnings, with membership fee income rising to $1.7 billion over the past six months, compared to $1.6 billion a year earlier. This increase boosted earnings even though Costco routinely books the lowest gross profit margin of its retailing cohort.

TGT Gross Profit Margin Chart

Gross Profit Margin data by YCharts.

5. February sales

The final week of February showed declining sales in comparison with the demand surge that struck a year ago during the early days of the COVID-19 pandemic lockdowns. But Costco's revenue and customer traffic still grew last month, year over year.

This time around, the categories that are selling strong aren't consumer staples like cleaning supplies and tissue paper, as was the case at the start of the pandemic. Instead, Costco fans last month spent freely on home furnishings, small appliances, liquor, toys, and sporting goods. It's a great sign for the health of the business that shoppers have been turning to the warehouse giant to meet these daily needs through every phase of the pandemic to date.

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Stocks Mentioned

Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$428.40 (2.87%) $11.97
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$122.91 (3.11%) $3.71
Target Corporation Stock Quote
Target Corporation
TGT
$154.44 (-0.59%) $0.92
The Kroger Co. Stock Quote
The Kroger Co.
KR
$50.68 (4.15%) $2.02
BJ's Wholesale Club Holdings, Inc. Stock Quote
BJ's Wholesale Club Holdings, Inc.
BJ
$54.98 (5.13%) $2.69

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

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