It's been a tumultuous month for the stock market, and investors are doing their best to try to stay calm as major market benchmarks have fallen sharply in September. Stock index futures suggested that Wednesday morning could bring a small bounce. Yet market participants still seem on edge about the state of the economy and the impact that policymakers have had on macroeconomic prospects in the near future.
Consumers are getting a lot of attention from Wall Street, because so far, that portion of the economy has held up the best. Yet as the latest financial report from Costco Wholesale (COST 0.13%) showed, even consumers are starting to feel the pressure from persistent inflation. Still, some parts of the retail industry are seeing signs of a turnaround, and the results from MillerKnoll (MLKN -1.23%) indicated one pocket of potential future strength there. Read on for the latest details.
Costco is slowing down
Shares of Costco Wholesale were down about 2% in premarket trading Wednesday morning. The warehouse retail giant reported fiscal fourth-quarter financial results for the period ended Sept. 3 that featured continued growth but at a slowing pace.
Costco's revenue for the quarter was $77.4 billion, up 9.4% year over year. However, a significant portion of that gain came from an accident of the calendar, as this year's fiscal fourth quarter had one extra week compared to the year-ago period. Comparable sales were up just 1.1% across the company, although after adjusting for lower gasoline prices and for foreign currency impacts, Costco's adjusted comps rose 3.8%.
At least so far, Costco hasn't had too many problems with earnings growth. Net income of $2.16 billion for the quarter was nearly 16% higher than in the same period last year. For the full 2023 fiscal year, revenue climbed 6.7% to $237.7 billion, producing net income of $6.29 billion, up 7.7% from fiscal 2022.
One item of interest to many shareholders is that Costco has thus far not chosen to implement a new membership fee increase. It has been six years since the last boost, and that's in line with when the warehouse retailer has historically considered an increase. Yet with many consumers struggling with the impact of inflation, the timing might be better later than it would be now.
MillerKnoll boosts margins despite macroeconomic challenges
By contrast, MillerKnoll shares soared, climbing 20% in the premarket session early Wednesday. The maker of office furniture and home furnishings doing business as Herman Miller reported fiscal first-quarter financial results for the period ended Sept. 2 that reflected weakness in the economy but showed the company's devotion to getting costs under control.
MillerKnoll's numbers weren't too pretty. Sales fell 15% year over year to $918 million. Net income was down a steeper 35% to $16.7 million. After accounting for various extraordinary items, adjusted earnings of $0.37 per share fell 16% from the $0.44 MillerKnoll earned in the year-ago period.
Difficult macroeconomic conditions in Europe and China weighed on MillerKnoll's results, and even though many investors believe that North America might avoid a recession, pressure on the housing market due to high mortgage rates remains palpable. Yet a big boost in gross margin shows the extensive effort that MillerKnoll has made to get costs under control.
Order activity continued to drop, but the pace of declines slowed, raising hope that MillerKnoll's business could turn around soon. Indeed, the company boosted its earnings guidance for the full 2024 fiscal year, now expecting between $1.85 and $2.15 per share on the bottom line. With the stock having closed below $20 per share on Tuesday afternoon, that projection makes MillerKnoll look like a smart value play in many investors' eyes.