The retail giant’s quarterly results fell slightly short of expectations.
Shares of Costco Wholesale (COST) declined on Friday following the release of its fiscal fourth-quarter revenue, which came in marginally below forecasts.
Prior to Thursday afternoon’s earnings report, the warehouse retailer was trading at a high valuation, so the subsequent dip was anticipated given the slight revenue miss.
By 10:51 a.m. ET on Friday, the stock had decreased by 1.5% after initially falling by up to 3% earlier in the session.
Costco continued to demonstrate consistent growth in the period ending September 1. Comparable sales increased by 6.9%, excluding the effects of gas prices and currency exchange rate fluctuations.
Revenue rose by just 1% to $79.7 billion, though it is important to consider that this year’s fiscal fourth quarter was 16 weeks long, compared to 17 weeks in the previous year. The revenue result fell short of analysts’ consensus estimate of $79.97 billion.
Despite the near-flat revenue growth, Costco managed to increase its gross margin from 11.9% to 12.4%. Operating income grew by 9.4% to $3.04 billion, and earnings per share climbed from $4.86 to $5.29, surpassing the consensus estimate of $5.08.
During the earnings call, management highlighted that recent enhancements, such as the introduction of membership card scanners to expedite the checkout process, are yielding positive results.
Costco remains one of the most consistent retailers in the industry, with a business model that has proven durable over time. However, the stock is currently trading at a premium valuation, with a price-to-earnings ratio of 53.
While the business remains robust, investors should moderate their expectations for further share price growth, as the current valuation reflects high expectations.