Costco reported total revenue of $95.72 billion for the August quarter, an 11.1% increase year over year, surpassing Wall Street's expectations of $94.86 billion. Adjusted earnings per share rose 15% to $6.75, also beating forecasts. However, membership fee income grew 7.3% to $1.85 billion, slightly below the anticipated $1.86 billion.
Despite improvements in membership renewal rates, the total paid membership of 84.1 million fell short of expectations, reflecting a 3.8% year-over-year growth, continuing a trend of slowing growth. The company did see a rise in higher-tier executive memberships, which typically renew at higher rates.
Analysts remain cautious, reiterating a hold-equivalent rating while lowering the price target from $1,100 to $1,050, citing the need for more consistent membership growth to justify the stock's premium valuation. Costco's gas business performed well, saving members over $3.2 billion compared to average market prices, which is crucial for driving foot traffic to its warehouses.
The company opened 12 new warehouses in the quarter and plans to continue expanding, indicating confidence in future growth despite current challenges