Analysts Expect Strong Q4 Results
Costco is preparing to report its quarterly results on Tuesday after the market closes, and many are looking to see how the wholesale retail giant’s cheap fuel prices have impacted consumers’ spending habits.
With major economic challenges, such as rising gas prices, student loan repayments, and higher interest rates, putting financial strain on many Americans, the company’s low-priced gas has become increasingly attractive to consumers, leading to more visits to its stores.
According to Bloomberg data, Wall Street expects Costco’s adjusted earnings per share to come in at $4.76, while revenue is expected to reach nearly $77.6 billion. Same-store sales are expected to increase by 1.87%.
In August, visits to Costco were up 3% compared to the previous year, according to Placer.ai data. Meanwhile, overall visits to wholesale clubs and superstores decreased by 1.9% in August and 0.4% in June and July. This suggests that Costco’s low gas prices are helping to attract new customers to its stores, where they are more likely to make additional purchases.
Costco’s Affordable Gas Prices Attract Customers
Amidst rising gas prices during the summer, the company’s affordable gas prices have been highly appealing to consumers. According to AAA, as of Monday, the average national gas price was $3.85 per gallon, which is slightly lower than the 2023 high. Additionally, Evercore ISI analyst Greg Melich has pointed out that the deflation in gas prices (-2%) is worth monitoring, as any further increase in fuel prices could provide added traffic, competition, and market share boost, which would emphasize the loyalty model.
Costco Sees Increase in Sales of Food and Miscellaneous Goods
Costco exec David Sherwood has also noted that sales of food and miscellaneous goods, such as candy, increased by high single digits in late August. The bakery and meat departments were among the better-performing departments. E-commerce sales are also expected to grow by 5% compared to last quarter when e-commerce sales were 10% lower. Although big-ticket items in e-commerce sales were down 20% year over year, they still made up 55% of e-commerce sales.
Costco’s cheap fuel prices are boosting the company’s sales and earnings. Analysts expect strong Q4 results, and the company is seeing an increase in sales of food and miscellaneous goods. Costco’s affordable gas prices are attracting customers, who are also more likely to make additional purchases when they visit the store.
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