Costco Q1 earnings preview: Another quarter of growth expected as shoppers continue to prize value

Costco (COST) is set for another bulk sized quarter, as consumers look for wallet-friendly prices on everyday essentials.

The wholesale retailer saw foot traffic up year-over-year, beating the likes of Sam’s Club (WMT) and BJ’s Wholesale Club (BJ), according to Placer.ai. On Thursday afternoon, the company is expected to report net sales of $57.98 billion, up 8.07% year over year, and adjusted earnings of $3.70, up 8%.

Same-store sales are expected to jump 5.93% from a year ago, led by its growing international business, up 7.46%. Same store sales are up expected to grow 6.96% in Canada, and 5.51% in the US.

E-commerce is also expected to be a bright spot, with estimates of a 11.5% year-over-year increase.

In the prior quarterly report, digital sales grew more than 18% year-over-year, powered by demand for gold bars, silver, and appliances, Costco CFO Richard Galanti said on the earnings call.

Membership fees, a key revenue stream, are expected to come in at $1.53 billion, up from $1.51 billion a year ago.

A Costco Gold Star membership costs $60 per year, while an Executive Membership goes for $120. Some on the Street predicted last year that Costco would raise fees this summer.

Shares of Costco are up 22% year-to-date, outpacing the S&P 500’s (^GSPC) roughly 11% gain.

“We continue to believe a premium valuation is warranted, given Costco’s superior global unit growth prospects, leading competitive position, and track record of driving share gains,” Oppenheimer analyst Rupesh Parikh wrote in a note to clients, adding that “management can unlock even more shareholder value over time through driving alternative revenue streams.”

JP Morgan analyst Christopher Horvers wrote that the company’s stock continues to benefit from a higher income audience, along with a long history of consistent market share gain.

Wall Street is eager to hear how non-food categories like the jewelry department (including gold bars) performed, along with traditional strength from fresh food, led by meat and produce.

This comes as consumers are looking for value when it comes to groceries. In April, groceries prices jumped 1.1% compared to last year, but dropped 0.2% compared to March, per the US Bureau of Labor Statistics.

Horvers also expects gas to provide a +70 basis point lift year-over-year from inflation, and from the average selling price being 5% more than April 2023.