Costco Earnings: Retailer Delivers Strong Results, but Top-Line Growth Moderates

Wide-moat Costco delivered a fiscal fourth quarter that was mostly in line with our expectations. Net sales expanded by 9% to over $77 billion during the quarter and comparable sales (excluding gasoline prices and foreign currency impacts) improved by nearly 4% as customers continued to flock to Costco’s banner. The retailer posted global traffic growth of 5.2% during the quarter, though a pullback in spending on big-ticket discretionary items and fuel price deflation weighed on the average ticket. Despite operating amid an uncertain economic backdrop, we surmise Costco boasts an enviable industry position given the retailer’s enticing value proposition and resounding customer base, leaving our long-term outlook intact. As such, we don't expect to alter our $450 fair value estimate materially, and we view shares as overvalued.