Can anything slow down Costco?

Its latest results show impressive gains in every category as the warehouse chain keeps it in cruise control.

By Jonathan Berr May 30, 2013 10:57AM
People entering a Costco warehouse store in New York City (© Spencer Platt/Getty Images)Costco (COST), the largest warehouse store operator, today reported better-than-expected quarterly results as the chain's low prices on food and gas lured increasingly confident shoppers. The shares, which have risen more than 14% this year, were moving higher in early Thursday trading.

Net income rose to $459 million, or $1.04 per share, in the most recent quarter, versus $386 million, or 88 cents per share, a year earlier. Revenue jumped to $24.08 billion, fueled by a 12% gain in membership fees. Wall Street had forecast earnings of $1.03 per share on revenue of $24.21 billion. Comparable-store sales, a key metric of sales at locations open for at least a year, rose 5%.

Costco sells products such as groceries, gasoline and generic medicines at or near cost and earns most of its profits from the membership fees, which can cost as much as $110 annually,  consumers pay to get into Costco. 

Things should continue getting better for the warehouse giant. Consumer confidence in May reached its highest level in more than five years. The chain also offers a surprisingly wide array of products and services, including travel, jewelry and caskets.

Another benefit is Costco's unique position in the market. Its low prices appeal to cost-conscious consumers, while shoppers with more cash to spend are attracted to the big-ticket items such as home electronics and computers. Small businesses, such as mom-and-pop restaurants, also like Costco because it sells a wide variety of supplies.

Jonathan Berr owns a small position in Costco. Follow him on Twitter @jdberr.


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16Comments
May 30, 2013 1:30PM
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Costco is a model for doing business, they treat their employees right and they give their customers good value for their money.
Simple formula, why do so many others fail?
May 30, 2013 11:18AM
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I wish they would put a Costco near me. Sam's club is not so good and ****'s lack in many areas of service.

May 30, 2013 1:22PM
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Good strategy, they make their profit all up front with their membership fees and then gradually give some of it back with how they price their stuff.  Have to admit, if you are looking for good quality merchandise, Costco is one of the better places to go.  There is so much cheap stuff out there now.

May 30, 2013 5:59PM
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Costco a true American success story. They pay and treat their employees well and they get the best employees and much lower turnover. It's a win/win for everybody. Good job Costco!!!!!!

 

I wish Walmart would take a page out of Costco's business model.

May 30, 2013 11:12AM
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That's how we shop  today: Online and Big Box.  I have worked for many manufactuers who have gotten out of the retail end and just  decided to let the  Costcos and Wal-Marts handle their product lines.

 

Oh, and you can say goodbye to your neighborhood mall.  In Europe, they are already turning them into oondominium complexes or sports venues.

May 30, 2013 6:39PM
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Our family likes Costco. It's the way to shop and the quality is great.

May 30, 2013 6:15PM
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Please bring a store to Concord, NC.  Were are just up the road from Charlotte, NC. At least build  at Concord Mills shopping mall (the biggest in NC).
May 30, 2013 11:42PM
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I was a Price Club member for years before Mr. Price's X partner came back to buy him out and the prices went very high.  I now don't purchase much from Costco as I can purchase most of the items from other retailers at the same prices.  I once bought a lot of tires from Price and Costco but the prices are so high now.   Many people who buy groceries purchase more than they can use.  I don't know why people go to Costco.

May 30, 2013 5:12PM
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Costco has been increasing the prices quite rapidly though and now to a point that some food items dont even make sense to buy there. The price might still be less than other stores but the difference has been greatly reduced. So buying bulk makes no sense.

 

Higher prices has led to stronger profits as well for Costco. Food items no longer feels cheap there.

 

The price elasticity has been stretched to the maximum now at Costco and this growth cannot be maintained any more.

 

I am aloyal Costco customer but i prefer to keep my eyes open and it is for that that i initially started shopping at Costco.

May 30, 2013 11:40AM
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Just don't act up....So the cops don't storm the place and punch you ticket.
May 30, 2013 1:33PM
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GMO..........OMG!!!!!

 

Costco gives not one moment of consideration about products containing GMO's. They are no different. It's all about profit. Their customer's health is of no concern as long as they can get their money before they die.

 

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