After Costco Wholesale missed Wall Street’s expectations for earnings and revenue Wednesday, analysts peppered company executives with questions about how it will battle competition from online retailers.
For the quarter ended Nov. 20, the Issaquah-based warehouse giant reported adjusted earnings per share of $1.17, up 7.3 percent from $1.09 year-over-year. That fell short of the $1.19 in adjusted earnings that Wall Street analysts had been expecting, according to a Zacks consensus estimate.
Without the adjustment of 7 cents per share, attributed to a nonrecurring $51 million legal settlement, the company reported earnings per share of $1.24.
Total revenue, including membership fees, also came in below expectations at $28.1 billion, an increase of 3.2 percent from $27.22 billion last year. The company logged $27.47 billion in net sales and $630 million in membership fees.
But analysts had expected revenue of $28.38 billion, according to Zacks.
Richard Galanti, Costco’s chief financial officer, attributed the shortfall on factors including deflationary prices and lower profits from gas sales.
On a slightly brighter note, so-called comparable sales — sales at stores open at least a year — was up 1 percent companywide in the first quarter. That measure was flat last quarter, and down 1 percent in the year-ago quarter.
Excluding the effects of changing gas prices and foreign exchange, though, comparable sales companywide went up only 2 percent, compared to 3 percent last quarter and 6 percent year-over-year.
But the Wall Street analysts seemed most interested in what Costco was doing to improve the online shopping experience for its customers, especially given concerns about overlap between Amazon Prime member households and Costco member households.
But Costco is making improvements to its online shopping experience, including making search easier, improving the return process, bettering members’ ability to track their orders, and increasing the number of depots from which orders can be fulfilled, resulting in “closer, faster and less expensive delivery,” Galanti said.
“We think we can and should do a lot more online. But we also want to get people into the warehouses,” he said. “We think some of the things we do in the stores will keep them coming.”
