Home Costco Posts Strong Q4 Comps, Tackles Holiday Supply Challenges
September 24, 2021
Costco Posts Strong Q4 Comps, Tackles Holiday Supply Challenges
Posted In: Retail Articles

By Mike Duff

Contributing Editor

Costco Wholesale Corp. clubs in the U.S. posted double-digit comparable sales gains in the fourth quarter as e-commerce sales growth slowed with consumers returning to in-person shopping, while at the same time beating a Wall Street estimate on earnings.

As it moves into the holiday season, CFO Richard Galanti said in a fourth-quarter conference call, the company is dealing with supply chain issues with some success.

Net income for the fourth quarter was $1.67 billion, or $3.76 per diluted share, compared to $1.39 billion, or $3.13 per diluted share, in the year-prior period.

Costco topped a MarketBeat-published analyst average estimate of $3.57 per diluted share for the quarter.

The most recent fourth quarter was hit by a write-off of certain information technology assets of $84 million pre-tax, or 14 cents per diluted share. Incremental expense related to COVID-19 premium wages and sanitation costs of $281 million pretax, or 47 cents per diluted share, had a negative effect on earnings in the year-before quarter, as did a $36 million pretax charge, or six cents per diluted share, related to the prepayment of $1.5 billion of debt, somewhat offset by an $84 million pretax benefit, or 15 cents per diluted share, for the partial reversal of a reserve related to a product tax assessment taken in fiscal year 2019.

Adjusted to exclude the effects of fuel price and foreign exchange volatility, comparable sales in the United States increased 10.3% in the quarter year over year while those for Canada increased by 6.7% and those for other international markets increased 7.3% for a company total of 9.4%. E-commerce gained 8.9% in the quarter versus the 2020 period.

In the conference call, Galanti pointed out that the 8.9% e-commerce gain came over 91% advance in the fourth quarter a year previous. 

Net sales for the quarter increased 17.5% versus the year past period to $61.44 billion, just about even with Wall Street expectations.

Net income for the fiscal year was $5.01 billion, or $11.27 per diluted share, compared to $4 billion, or $9.02 per diluted share, in the 2020 fiscal year.

Adjusted comps in the U.S. increased 13.6% year over year while those for Canada increased 12.1% and those for other international markets increased 13.4% for a company total of 13.4%. E-commerce advanced 42.6% versus 2020.

Net sales for the fiscal year increased 17.7% versus the annum earlier to $192.05 billion.

In the conference call, Galanti noted that Costco is feeling the effects of supply chain challenges, which have extended traditional rollout times, in one example, from eight to 12 weeks to 16 to 18 weeks in the case of furniture. Yet, he says, Costco has seen advantages as it’s selling out of some items within one to two weeks, giving it time to reorder in its established sales window for affected categories, He added that Costco, looking forward through the next few months, is ordering as much as it can earlier than normal and dealing with issues such chip shortages, which is affecting appliances among other mostly electronic categories, as well as rising transportation costs as it can to mitigate its costs and the cost of goods to members.

Costco operates 817 warehouse clubs, including 565 in the United States and Puerto Rico, 105 in Canada, 39 in Mexico, 30 in Japan, 29 in the United Kingdom, 16 in Korea, 14 in Taiwan, 13 in Australia, three in Spain, and one each in Iceland, France and China. Costco also operates e-commerce websites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia.

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