Costco (NASDAQ: COST) Earned Profits More than Expectations

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By Hanson So on October 9, 2014 Company

Costco (NASDAQ: COST) is an American warehouse club that provides services limited to membership only customers. The company provides various products ranging from groceries, house-hold items, furniture, clothes, toys, and sweets, seasonal items such as plants or holiday shopping items under one roof.

According to a latest Reuters report, Costco (NASDAQ: COST)’s profits exceeded the expectations of analysts in 5 quarters. The back to school and higher membership fees helped Costco (NASDAQ: COST) in achieving these profit statistics. On Wednesday, a reported 3% rise in Costco (NASDAQ: COST) shares resulted in company achieving an amount of $128.95, which is the highest so far.

According to an end of August report released by Costco (NASDAQ: COST), its same-store sales saw an increase of 7% which didn’t include the sales of its fuel. Costco (NASDAQ: COST)’s customers have relatively higher wages, compared to the customers of Wal-Mart (NYSE: WMT) stores Inc. or Target corp. (NYSE: TGT).

During holiday season, retailers attract customers by reducing their prices. The reduced prices or holiday season sales attract customers with high as well as low incomes. Costco (NASDAQ: COST) is also part of the holiday season sales. Costco (NASDAQ: COST) has also claimed that it will run various promotions to further accelerate its sales during the holiday season.

Costco (NASDAQ: COST)’s global employee population is 185,000 and the company has assured that it will not change its healthcare benefits. Richard Galanti, the Chief Financial Officer of Costco (NASDAQ: COST) affirmed that all of Costco (NASDAQ: COST)’s employees will continue to benefit from its healthcare services without any changes. On the other hand Wal-Mart (NYSE: WMT) which is the biggest private sector employer of U.S stated that the company will discontinue benefits for some of their employees who work part-time.

Analysts predicted a 5.9% rise in Costco (NASDAQ: COST)’s same-store sales but the sales exceeded the expected amount and rose up to 6% in September. According to Thomson Reuters I/B/E/S, same-store sales in September rose up to 4.1%. This figure doesn’t include sales for drug retailers.

Costco (NASDAQ: COST) saw a 13% rise in its net income, which means $697 million or $1.58 per share in the quarter that was calculated in the end of September. The revenue collected through memberships rose to 7.3% reaching up an impressive figure of $768 million.

Deutshe Bank analyst, Paul Trussle raised his price target on the stock from $130 to $135 in his note. He said that the company is positive about the margin expansion because there has been less intensity in the promotions within food, cycling of higher meat/produce costs and IT expenditures have run without hassle.

The revenue, as a result increased to 9.3% reaching a figure of $35.52 billion. Analysts have predicted a profit of $1.52 per share on the average of $35.47 billion.

The company’s shares have increased up to 5.3% this year. This surpassed the 1% rise that Dow Jones Food Retail and Whole sale Index witnessed. This observation was reported by Sruthi Ramakrishnan and Rama Venkat Raman in Bangalore.