Costco's earnings were a big win on the back of gold and silver bullion sales

Costco (COST) once again bulked up its bottom line on the back of gold bullion and warehouse-friendly prices on everyday essentials.

The Wholesale Club reported adjusted earnings per share (EPS) of $3.92, beating estimates of $3.62. Revenue was $58.44 billion, up 5.7% year over year, but slightly below expectations of $59.04 billion, according to Bloomberg data.

Same-store sales, excluding gas and foreign exchange, jumped 5.8%.

In the United States, same-store sales growth was higher than expected at 4.8%. Canada beat estimates with same-store sales growth of 9%, while international stores posted a higher-than-expected increase of 8.2%.

Digital sales grew more than 18% from a year ago, fueled by demand for gold and silver bullion and hardware, Richard Galanti, Costco's chief financial officer, told analysts on a conference call late Thursday.

Membership fees, a major source of revenue, reached $1.11 billion, compared to $1.03 billion a year ago. This is also a jump from the first quarter, which brought in $1.08 billion.

TETTERBORO, NJ - JUNE 28: Customers check their purchases inside a Costco store on June 28, 2023 in Teterboro, New Jersey.  Costco is cracking down on sharing membership cards in its stores.  (Photo by Kina Bettencourt/VuePress)

Customers review their purchases inside a Costco store on June 28, 2023, in Teterboro, New Jersey. Costco is cracking down on sharing membership cards in its stores. (Kina Bettencourt/View Press) (Press presentation via Getty Images)

A Costco Gold Star membership costs $60 annually, while an Executive membership costs $120. Some on the Street last year expected Costco to raise fees this summer.

Costco shares fell 4.6% in pre-market trading on Friday as Wall Street saw the stock as fairly valued at current levels.

“The quarter was strong but it's hard to see the catalyst for the next leg higher at the current valuation. Cost is very well positioned to continue to capture share but given its high multiple (29.0x 2024E EV/EBITDA) and crowded positions make us more aggressive,” Citi analyst Paul Lejuez said in a note to clients. : “We are neutral on the stock. We see the risk/reward as balanced at current levels.”

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Costco shares are still up about 55% over the past year, easily beating the S&P 500's (^GSPC) gain of 29%.

Earnings Summary:

Here's what Costco reported in its fiscal second quarter versus Wall Street estimates, according to Bloomberg data:

  • Net sales: $58.44 billion compared to $59.04 billion

  • Adjusted earnings per share: $3.92 vs. $3.62 expected

  • Same store sales growth: 5.8% versus 4.65% expected

    • US same-store sales growth: 4.8% vs. 4.09% expected

    • Same store sales growth in Canada: 9% vs. 6.31% expected

    • – Other countries: 8.2% compared to the expected 6.17%

What else caught our attention

  • Costco's U.S. customer traffic rose 4.3% in the quarter.

  • Costco opened its sixth store in China during the quarter in Shenzhen. Another one is expected to open in the country this year as part of an effort to open 30 new locations around the world.

  • Costco is getting into the sushi business. “We recently opened our first fully-operated sushi show in Issaquah, Wash., across the street from our headquarters, and two more are scheduled to open in the very near future,” Galanti said on the earnings call. “This operation is what we have done successfully for years — for many years.” “And throughout Costco Asia and many countries there. The sushi program has proven to be a category in which we can achieve success in terms of quality and price, and we look forward to seeing more of that in the future.”

Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at [email protected].

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