The wholesale retail giant is set to report quarterly results on Tuesday after market close, with a detailed breakdown of what consumers are spending on as major headwinds like higher gas prices, student loan repayments, and higher interest rates, among others, take a toll on Americans' wallets.
For the fourth quarter, Wall Street expects adjusted earnings per share to come in at $4.76 while revenue is expected to come in at nearly $77.6 billion, per Bloomberg data. Same-store sales are expected to rise 1.87%.
Gas prices spiked over the summer, making Costco's cheap fuel attractive for customers. As of Monday, the national average gas price stood at $3.85 per gallon, per AAA, slightly off the 2023 high.
As consumers flock to Costco to fill up their tanks, they also tend to shop in stores.
Placer.ai data showed that, compared to last year, visits to Costco were up 3% in August, 4.5% in July, and 3.6% in June. Meanwhile, overall visits to wholesale clubs and superstores dropped 1.9% in August and 0.4% in June and July.
"Disinflation continues in Food/Sundry … while gas price deflation (only -2%) is worth tracking – particularly given August’s surge," Evercore ISI analyst Greg Melich wrote in an Aug. 31 note. "Further appreciation in fuel prices could provide an additional traffic, comp and share tailwind to further highlight the loyalty model."
The earnings preview:
Here's what Wall Street expects in Costco's fiscal fourth quarter, according to Bloomberg data:
Net sales: $77.6 billion expected
Adjusted EPS: $4.76 expected
Same-store sales growth: 1.87% expected
E-commerce sales growth: 5% expected
Traffic growth: 2.51%
Inventory growth: 7.31%
In late August, Costco exec David Sherwood said sales of food and miscellaneous goods such as candy grew by high single digits. The bakery and meat departments were part of the "better-performing departments."
E-commerce is expected to get a slight boost too, up 5% compared to last quarter, when e-commerce sales also came in 10% lower. Big ticket items in e-commerce sales were down 20% year over year but made up 55% of e-commerce sales.
Costco stock has been gaining momentum heading into earnings. Shares are up 2.3% over the last month and 22% year to date.
What else we're watching: Costco membership fees
Membership fees, a key revenue stream for the wholesale retailer, are expected to come in at $1.46 billion. In the third quarter, the company brought in $1.04 billion in membership fee revenue.
Investors will be watching closely to see if Costco announces any plans to raise membership fees in the near future, as the company typically raises prices every five years and seven months on average.
Costco last raised membership prices in June 2017, and a Costco Gold Star membership costs $60 per year, while an Executive Membership goes for $120.
Last quarter, the company delayed hiking fees. During the Q3 earnings call, CFO Richard Galanti told UBS analyst Michael Lasser that Costco feels "very good" that it could increase membership fees "without impacting, in any meaningful way, renewal rates or sign-ups or anything."
"And at some point, we will," Galanti added. "But our view right now is that we've got enough leverage out there to drive business, and we feel that it's incumbent upon us to be that beacon of light to our members in terms of holding them for right now."
What Wall Street is saying ahead of earnings:
"Costco's value proposition continues to shine as the U.S. core comp accelerated to +4.5% in July ... led by the best traffic growth since July 2022. The sequential acceleration was driven by fresh foods as performance in food and sundries and non-food was steady.
"Another positive in the month was e-commerce, which returned to YOY growth after nine months of declines, marking a 760 bps sequential improvement in 2YR growth, and likely indicating healthier big-ticket trends. Macro uncertainties remain, but COST is one of the most consistent operators in our coverage, and should continue to be a share gainer given its value proposition." -Krisztina Katai, Deutsche Bank
—
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
Read the latest financial and business news from Yahoo Finance
