(Reuters) -Costco Wholesale topped Wall Street’s estimates for quarterly revenue and profit on Tuesday as consumers flocked to its stores for cheaper groceries and other necessities, helping offset feeble demand for discretionary items.
Shares of the membership-only retailer dropped more than 2% in extended trading.
Costco has managed to drive robust sales growth owing to its ultra-low prices for essential goods and a loyal member base, helping the retailer grow its market share despite a tough macroeconomic environment.
The company has also continued to see its membership grow over the past few months. Revenue from membership fees jumped 13.7% to $1.51 billion in the reported quarter.
Although demand for discretionary items like sporting goods and houseware has been under pressure, strong sales gains on the consumables side – including for fresh foods, candy and bakery – have helped the firm.
Total revenue at the company rose to $78.94 billion in the fourth fiscal quarter, from $72.09 billion a year earlier. Analysts on average expected revenue of about $77.90 billion, according to LSEG IBES data.
Costco’s better product sourcing, including a large assortment of private label brands, as well as easing supply-chain costs have also helped bolster its profits.
While the sharp shift in consumer spending away from discretionary goods to essential items has pinched retailers like Target and Dollar General, brokerage Truist said Costco was not seeing a severe impact as the company keeps the margin gap between the two categories very small.
Net income attributable to Costco increased to $2.16 billion, or $4.86 per share, in the quarter ended Sept. 3, besting expectations of $4.79 per share.
(Reporting by Deborah Sophia in Bengaluru; Editing by Pooja Desai)
