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Why Costco Stock Jumped Today

By Joe Tenebruso – Dec 10, 2021 at 6:27PM

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The retail giant is battling supply chain challenges -- and winning.

What happened

Shares of Costco Wholesale (COST 1.54%) climbed 6.6% on Friday after the warehouse retailer delivered better-than-expected revenue and profit growth in its fiscal 2022 first quarter. 

So what 

Costco's net sales surged 16.7% year over year to $49.42 billion, fueled by store openings and robust same-store sales growth. The discount chain's store count expanded to 828 warehouses, up from 803 in the year-ago period.

Meanwhile, Costco's comparable sales, adjusted to exclude fluctuations in gasoline prices and foreign exchange rates, rose 9.8%. The gains were driven by a 6.8% increase in traffic and a 2.5% rise in average transaction price. 

A digital shopping cart sign is hanging on a brick wall.

Image source: Getty Images.

Moreover, Costco is making progress with its online retail initiatives. Its e-commerce sales grew a solid 13.3%.

Better still, Costco's membership fees increased 9.9% to $946 million. The company continues to do an excellent job of retaining its customers, as evidenced by its 91.6% renewal rate in its key U.S. and Canada markets and 89% worldwide rate. 

All told, Costco's net income rose 13.6% to $1.3 billion, or $2.98 per share. That was well above Wall Street's estimates, which had called for earnings per share of $2.64.

Now what

Costco's performance is even more impressive considering that the warehouse chain, like many retailers, is facing a host of supply chain-related challenges.

"The factors pressuring supply chains and inflation include port delays, container challenges, COVID disruptions, shortages of varying components, raw materials, ingredients, and even packaging supplies, labor cost pressures, and truck and driver challenges," CFO Richard Galanti said during a conference call with analysts. 

To mitigate these supply chain disruptions, Costco is ordering merchandise earlier than normal and storing extra inventory to prevent shortages. 

"[We] feel pretty good about staying in stock and continuing to work to mitigate cost and price increases as best we can," Galanti said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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