Costco starting to see some prices come down, but not for food

By Claudia Assis

Costco OKs special dividend of $15 a share; no word yet on membership-fee increases

Costco Wholesale Corp. executives told Wall Street late Thursday they are starting to see some prices come down, mostly thanks to lower shipping costs, but nothing yet on food prices.

In a call with analysts after the retail giant's fiscal first-quarter results, the Costco (COST) executives said that last quarter they had estimated year-over-year inflation in the 1% to 2% range. Their estimate for the recent quarter, however, is in the flat-to-1% range.

Bulkier items such as furniture sets and TVs are cheaper due to lower freight costs year over year, the Costco executives said. On the food side, however, Costco buyers have not seen many items priced lower.

"A few things are up and a few things are down, but no giant trend either way," Chief Financial Officer Richard Galanti said on the call. "We'll have to wait and see."

Costco shares edged higher immediately after the quarterly results, and at last check were up nearly 2% in the extended session Thursday. The retailer late Thursday reported fiscal first-quarter earnings and revenue that were largely in line with expectations.

Galanti also answered an apparently burning questions for those interested in Costco: Just how many pumpkin pies,exactly, did the retailer sell around Thanksgiving?

"I've gotten more than a few calls in the past few weeks as to how many pies we sold in the U.S. leading up to the Thanksgiving holiday," Galanti said.

The answer? In the three days toward the holiday, Costco sold 2.9 million of its "famous" pumpkin pies, along with 1.3 million apple and pecan pies, so more than 4 million pies in total during these days, Galanti said.

All those pies - and countless other products - fueled Costco earnings to $1.59 billion, or $3.58 a share, in the quarter, compared with $1.36 billion, or $3.07 a share, in the year-ago period. Quarterly results included a tax benefit of $44 million, or 10 cents a share, related to stock-based compensation, the company said.

Total revenue rose 6.1% to $57.80 billion, from $54.44 billion a year ago, and was the highest for a fiscal first quarter in at least three years.

Same-store sales for the quarter rose 3.8%, with e-commerce sales up 6.3% in the quarter. Same-store sales were also within consensus.

Analysts polled by FactSet expected the retailer to report adjusted earnings of $3.41 a share on sales of $57.79 billion.

Thursday's release did not include any news on a potential membership-fee increase at Costco, which a company executive said in September was coming.

Costco also said that its board has declared a special cash dividend of $15 a share, payable Jan. 12 to shareholders of record as of the close of business on Dec. 28. The aggregate amount of the payment will be about $6.7 billion, Costco said.

Shares of Costco have gained 38% so far this year, compared with an advance of around 23% for the S&P 500 index SPX.

-Claudia Assis

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12-14-23 1802ET

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