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COSTCO WHOLESALE CORP /NEW (COST) Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 delivered solid normalized growth: net sales $78.2B (+1% reported; +7.3% normalized for prior year’s extra week), diluted EPS $5.29, gross margin 11.00% (+40 bps YoY), and e‑commerce comps +18.9% .
  • Membership fee income was $1.512B; renewal rates remained strong (U.S./Canada 92.9%; worldwide 90.5%), with paid household members up 7.3% YoY to 76.2M; Executive memberships rose to 35.4M and 73.5% of sales .
  • Management highlighted wage investments (~4 bps SG&A headwind in Q4) and modest gasoline margin tailwinds; interest income fell as the company lapped the $6.7B special dividend paid in Jan-2024 .
  • Catalysts ahead: deferred accounting means the September 1 membership fee increase will largely benefit 2H FY2025 and into FY2026, while e‑commerce momentum and international expansion underpin top-line and margin leverage .

What Went Well and What Went Wrong

What Went Well

  • Nonfoods strength with double-digit growth across gold/jewelry, gift cards, toys/seasonal, home furnishings, tires, and housewares; fresh departments grew high single digits, supported by value-driven pricing (e.g., 13% price cut on KS boneless chicken tenders drove 21% volume lift) .
  • Digital momentum: e‑commerce comps +18.9% (+19.5% ex-FX), improved fulfillment productivity, and completed buy-online, pickup-in-warehouse for TVs; app downloads reached ~39M and search click-through doubled after upgrade .
  • Membership health: paid households 76.2M (+7.3% YoY), Executive members 35.4M (+9.6% YoY), with renewal rates stable; “we very much look at [fee increase] holistically… lowering prices, new KS products, and investing in employees” .

What Went Wrong

  • Average ticket declined (-0.9% worldwide; -0.3% U.S.), pressured by gas deflation and FX; adjusted ticket only slightly positive .
  • SG&A rate ticked up 8 bps (9.04%), with ~4 bps headwind from late-Q4 wage increases; interest income declined YoY following the January special dividend, and FX swung to an $18M loss .
  • Supply chain: Red Sea disruptions and emerging U.S. port strike risk prompted contingency actions; some commodities/inputs remained tight (eggs, prime beef, select vegetables), and categories like alcohol stayed relatively soft .

Financial Results

Quarterly Trajectory (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Billions)$57.33 $57.39 $78.19
Diluted EPS ($)$3.92 $3.78 $5.29 (incl. $0.14 tax benefit)
Gross Margin %10.80% 10.84% 11.00%
SG&A %9.14% 8.96% 9.04%

YoY Comparison – Q4 FY2024 vs Q4 FY2023

MetricQ4 2023Q4 2024
Net Sales ($USD Billions)$77.43 $78.19
Diluted EPS ($)$4.86 $5.29 (incl. $0.14 tax benefit)
Gross Margin %10.60% 11.00%
SG&A %8.96% 9.04%
Membership Fee Income ($USD Billions)$1.509 $1.512

Comparable Sales by Geography – Q4 FY2024

GeographyReported %Adjusted (ex gas, FX) %
U.S.+5.3% +6.3%
Canada+5.5% +7.9%
Other International+5.7% +9.3%
Total Company+5.4% +6.9%
E‑commerce+18.9% +19.5%

KPIs (oldest → newest)

KPIQ2 2024Q3 2024Q4 2024
Membership Fee Income ($USD Billions)$1.111 $1.123 $1.512
Paid Household Members (Millions)73.4 74.5 76.2
Total Cardholders (Millions)132.0 133.9 136.8
Executive Memberships (Millions)33.9 34.5 35.4
U.S./Canada Renewal Rate %92.9% 93.0% 92.9%
Worldwide Renewal Rate %90.5% 90.5% 90.5%

Notes:

  • Q4 FY2024 included nonrecurring net tax benefit of $63M (EPS impact $0.14) .
  • Q4 traffic +6.4% worldwide; average ticket −0.9% (slightly positive ex gas/FX) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
Membership fee increase accounting impactFY2025 cadenceN/AMajority of benefit recognized in 2H FY2025 and into FY2026 due to deferred accounting N/A (disclosure)
Interest income outlook1H FY2025N/AHeadwind vs prior year given lower cash balances post $6.7B special dividend and lower rates N/A (disclosure)
Gasoline profit cadenceNear termN/AGenerally stable over time; noted Q1 prior year had unusual volatility from world events Maintained (context)
Wage investments impactQ4 FY2024 run-rateN/A~4 bps SG&A headwind from late-quarter U.S./Canada wage increases; aim to offset via productivity and leverage N/A (disclosure)
CapexFY2024$4.3–$4.5B (Q3 view) Actual FY2024 spend $4.71B; Q4 capex ~$1.58B Above prior
Warehouse openingsFY2025N/APlan for 29 openings (3 relocations) → 26 net; ~12 outside U.S. N/A (plan)
DividendJuly 2024Quarterly dividend $1.16 declared July 10; payable Aug 9 Continuation of quarterly dividend Maintained

Earnings Call Themes & Trends

TopicQ2 2024 (Mar)Q3 2024 (May)Q4 2024 (Sep)Trend
E‑commerce momentum & profitabilityE‑comm +18.2% ex-FX; Logistics deliveries +28%; focus on value (Why Buy at Costco), app enhancements; e‑comm penetration high single-digit; Instacart adds ~1.5–2% if included Continued double-digit e‑comm growth; Logistics up 28%; expanding BOPIS in TVs; personalization roadmap E‑comm comps +18.9%; fulfillment efficiency improved; BOPIS for TVs completed; app search CTR doubled Strengthening; improving unit economics
Membership fee increase“When, not if”; levers strong; defer until macro normalizes Still evaluating; value reinvestment emphasized Implemented Sep 1; benefit recognized mainly in 2H FY2025/FY2026; member reaction minimal Executed; benefit deferred
SG&A leverageSG&A 9.14%; mix of wage increases and productivity SG&A improved to 8.96% on leverage/productivity SG&A 9.04%; ~4 bps wage headwind; offset via leverage Targeting productivity offsets
Gasoline marginsDown YoY in Q3 (headwind in ancillary); gallons +5% Tailwind modest in Q4; stable over time Stable outlook; volatility episodic Normalizing/stable
Supply chain & freightPanama/Red Sea rerouting; contracts insulated pricing Competitors more promotional in appliances; Costco Logistics differentiates Port strike risk monitored with contingencies; spot rates easing; contracts insulating Managed; contingency plans active
Retail media & personalizationBuilding capability; upside expected; reinvest in member Roadmap expanding; tech spend within normal CapEx trajectory “Significant opportunity”; will reinvest most dollars to drive growth Scaling; member-first model
Kirkland Signature penetrationLong-term steady increases; value vs brands Fresh margins deliberately lower; nonfoods improving KS penetration in “high 20s” and growing; margin cap maintained; global sourcing tailwinds Increasing; margin discipline maintained
International expansionChina openings and same-day delivery pilots 30 FY openings plan; strong non-U.S. pipeline 14 Q4 openings; FY2025 plan 29 openings with 12 outside U.S. Solid multi-year runway

Management Commentary

  • “Our goal is always to be the first to lower prices where we see the opportunities to do so,” citing multiple KS price reductions and localized production (e.g., Japan-produced KS paper towels with ~30% price cut) .
  • On wage investments and SG&A: “We were able to effectively offset those cost increases by driving productivity and sales leverage… and our expectation… is that we'll continue to do that” .
  • On membership fee increase cadence: “The vast majority of the benefit will come in the back half of fiscal year 2025 and into fiscal year 2026” .
  • On retail media: “We will approach this probably a little bit differently… we'll be reinvesting the vast majority of those dollars… intended to drive overall growth” .

Q&A Highlights

  • Membership scanners: ~350 U.S. warehouses rolled out, lifting sign-ups and renewals while improving front-end productivity .
  • Port strike risk and freight: Contingency actions include pre-shipping and alternate ports; spot rates peaked then eased; contracts insulated much of freight cost .
  • Gas profitability: Generally stable over time; Q4 benefited modestly; caution that volatility can affect quarterly cadence .
  • Wage levels/SG&A: Average U.S./Canada wage “just north of $30/hour”; ~4 bps Q4 SG&A headwind mitigated by productivity .
  • E‑commerce penetration/profitability: High single-digit penetration as reported; double-digit if including third-party digitally-started sales; profitability improving with scale and fulfillment efficiency .

Estimates Context

  • S&P Global (Capital IQ) Wall Street consensus estimates for Q4 FY2024 were unavailable due to data access limits at this time. As a result, we cannot quantify beats/misses vs consensus in this report. Please note: Estimate values would be retrieved from S&P Global if accessible.

Key Takeaways for Investors

  • Normalized top-line growth (+7.3%) and margin expansion (+40 bps gross margin) reflect merchandising excellence, e‑commerce momentum, and modest gas margin tailwinds; wage-driven SG&A headwinds remain manageable via productivity .
  • Membership metrics and renewal rates remain robust post-fee increase, supporting steady high-margin MFI growth; the bulk of fee benefits are deferred to 2H FY2025/FY2026, creating a medium-term earnings tailwind .
  • Digital capabilities (BOPIS for TVs; app inventory lookups, search upgrades) and Costco Logistics are differentiating big-ticket categories and driving double-digit e‑comm comps with improving unit economics .
  • International footprint expansion (26 net new warehouses planned in FY2025; ~12 outside U.S.) sustains multi-year growth runway and provides geographic diversification of comps .
  • Near-term watch items: spot/ocean freight volatility and potential U.S. port disruptions; FX swings; interest income headwinds in 1H FY2025 due to lower cash balances and rates .
  • Strategic upside: scaling retail media with member-first reinvestment, growing KS penetration with margin discipline, and curated marketplace expansion (Costco Next) to augment assortment while preserving the treasure-hunt model .

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