Costco tops quarterly sales, profit estimates on strong demand for cheaper groceries

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By Granth Vanaik

(Reuters) -Costco Wholesale topped Wall Street estimates for quarterly sales and profit on Thursday, as more customers turned to its stores to shop for cheaper groceries and essentials, offsetting slowing demand for discretionary items.

Costco has increased its sales thanks to its strategy of maintaining low prices on basic essentials as well as a devoted membership base that benefits from incentives offered like yearly 2% reward on qualified purchases at its warehouses.

The one-stop retailer has seen sales surge for its consumable categories like fresh food and sundries as well as its private-label brand Kirkland Signature, even as non-food categories including sports goods and office supplies have come under pressure due to persistent inflation.

The upbeat results come at a time when several U.S. retailers including bellwether Walmart, Dollar General and Best Buy have taken a cautious stance on consumer spending during the holiday season.

“Costco is in a strong position heading into 2024 after delivering a solid first quarter and continuing to hold its membership fee trump card in its back pocket,” said Insider Intelligence analyst Zak Stambor.

Costco’s quarterly revenue from memberships, priced between $60 and $120 per year and which account for most of the warehouse operator’s gross margin, rose to $1.08 billion from $1 billion a year ago.

Total revenue at the company rose 6.1% to $57.8 billion in the first quarter, compared to analysts’ estimates of $57.72 billion, according to LSEG data.

Costco’s per-share profit was $3.58, above expectations of $3.42.

The membership-only retail chain’s shares were up about 1% at $635.59 after the bell.

The company also announced a special cash dividend on its common stock of $15 per share payable Jan. 12 to shareholders.

(Reporting by Granth Vanaik in Bengaluru; Editing by Maju Samuel)

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