In This Article:
Forrester Research Retail Analyst Sucharita Kodali weighs in on Costco's latest earnings report and its position in the wholesale club landscape amid rising membership fees.
Video Transcript
- All right. Let's take a look at Costco. That stock on the move to the downside here after hours, off just about 1%. Just to remind you all, this is Yahoo Finance's Company of the Year. Digging into these results, revenue coming in at 54.4 billion. EPS a bit light in terms of what the Street was expecting. EPS totaling $3.07. The Street was looking for $3.10. Comp sales, ex gas, and FX, it was basically in line with expectations.
For more on this, we want to bring in Sucharita Kodali, Forrester Research retail analyst. Sucharita, great to have you here on Yahoo Finance. So I guess just first your initial takeaway. That miss on EPS clearly one of the reasons that we're seeing the stock trading to the downside after hours.
SUCHARITA KODALI: Yeah. I think that these are just some of the cyclical issues that even other retailers-- we heard the earlier Lululemon commentary. There could be anything from supply chain issues to higher labor costs. These are not unexpected. . I think that the bigger story when we look at it is that Costco had huge, huge gains through the pandemic. And they've held on to most of those gains. And that is one of the best things and one of the reasons that they are a Company of the Year. Earnings were a little bit soft. But I see those as cyclical issues that will likely recover in 2023 once labor costs stabilize. And the supply chain issues also normalize too.
- Hey, Sucharita. Pras here. Costco CEO told Yahoo Finance's Brian Sozzi basically that his members are actually more value conscious than they were before. What do you think that means exactly for the average Costco buyer?
SUCHARITA KODALI: Well, I think that every business is facing value conscious buyers right now. We're in an inflationary environment. Consumers are belt tightening. And you are seeing every category being very, very self conscious about pricing, about what is available, how these key value indicators are playing out for shoppers. So that doesn't surprise me. We see this in every recessionary environment.
And Costco has historically had some leverage because it tends to attract a higher income consumer. But you're seeing belt tightening across the socioeconomic strata. So it's not something that is just relegated to the dollar stores. We're seeing it at the club channel as well. What that means is that Costco is likely going to push its suppliers to give it better terms wherever possible. Costco is known for passing on its savings to shoppers. And they are likely going to push some of it to the CPGs that they do business with. And the consumer is going to have to absorb some higher pricing as well as a result of these higher costs.