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Stock Market Analysis

Costco Q4 Earnings: What To Expect

Costco has been one of the best-performing retailers in 2020 but what should investors expect from the earnings call? 

The success of Costco’s (NASDAQ: COST) business model — which consists of offering memberships, low prices, quality goods, and happy employees — has been made evident throughout the pandemic. As more consumers consolidated their shopping trips to limit exposure to the virus during the quarter, Costco being the world’s leading warehouse retailer, really benefited from this trend.

Costco’s net income for fiscal 2020 (ended August 2020) was $4 billion, or $9.02 per share, up 9% YoY. Additionally, the company surpassed 100 million members worldwide in the year, contributing to membership revenue of $3.54 billion. This strength in financials allowed the company to reward shareholders with growing dividends. In November, Costo announced a record $4.4 billion special distribution, which comes out to about $10 per share. 

Costco shares reached a record high back in November but the stock has since been hit by a bearish run and is down over 12% year-to-date. This downward movement was caused by wider market sentiment that the prospect of the economy reopening might reduce the need for pantry-loading,. This move has caused some investors to worry that the best days for this stay-at-home stock might be over. 

When is Costco’s earnings date?

Costo reports earnings for the fourth quarter of 2020 on Thursday, 4th of March after the market closes, at 5:00 PM EST.

How can I listen to Costco’s earnings call?

To listen to the call and to access the transcript, as well as the shareholder’s letter and the financial statements for the quarter, all you need to do is go to Costco’s investor relations page here.

What to expect from Costco’s earnings

Wall Street expects the warehouse membership club to report adjusted-earnings per share (EPS) of $2.41, up over 14% from the year-ago quarter, on revenue of $44.41 billion, up 13% year-over-year (YoY) in the fiscal second quarter. 

However, investors should expect to see high expenses in Costco’s financial report on Thursday. In the quarter that ended in November, the company reported $212 million in expenses caused by introducing an initiative which would bump its employees wages by $2 during the pandemic and these costs will also carry over to the December ended quarter. 

For the quarter ended in November, Costco’s total comparable sales increased 14.5% — but e-commerce was up 82% YoY. Shareholders will be eagerly waiting to hear how digital sales performed in the most recent quarter as online shopping remains popular. 

In 2020, around 105 million people paid for a yearly Costco membership. Many believe it might be time for the company to introduce a subscription fee increase. It’s been a few years since Costco has done so and, looking at the company’s most recent quarter, it’s evident that shoppers are happy with the membership service as average spending was up 9% on average. 

Costco shareholders will be focusing on two key metrics to describe subscriber growth from the earnings call. One is customer traffic, which has been growing all year. The other is the membership renewal rate, which reached a record high of 91%. If both of these figures impress, Costco will likely be heading into a strong 2021. 

As Costco’s status as an “essential retailer” should be coming to an end with the rollout of vaccines, shareholders will therefore be looking for solid 2021 guidance for earnings.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here

Nicole Byrne
Nicole Byrne
Nicole is a writer here at MyWallSt. Her favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.