Costco stock gains on Q4 earnings beat, will limit key item purchases amid COVID disruption
|Toronto Star 24 Sep 2021 at 16:04|
Costco Wholesale (COST) shares edged higher Friday after the big box retailer topped Wall Street forecasts for its fourth quarter earnings but noted it would begin limiting purchases of certain items owing to supply chain issues.
Costco’s August quarter sales — the final period of its fiscal year — rose 17 per cent from last year to a Street-beating $62.68 billion (U.S.), while comparable sales rose by a better-than-expected 9.4 per cent, paced by increases in Canada and the United States. Membership fees rose 11.7 per cent to $1.234 billion, Costco said, with total members topping 61.7 million.
The group earned $3.76 per share for the period, up 23.7 per cent from last year and well ahead of the Street consensus forecast, even as gross margins fell 32 basis points to 10.9 per cent thanks to rising COVID and supply chain costs.
Looking into the final months of the calendar year, however, Costco said it needs to plan for product delays linked to both COVID and supply-chain disruptions that are adding to delivery times, as well as the global shortage in semiconductors.
Costco shares were marked 1.7 per cent higher in early trading Friday to change hands at $460.40 each, a move that would extend the stock’s six-month gain to around 37 per cent.
“We continue to see favourable catalysts in the coming quarters, including a potential membership hike and special dividend,” said Oppenheimer analyst Rupesh Parikh, who carries an ‘outperform’ rating with a $500 price target on his “top pick” stock.
“Nearer-term, we expect more of rangebound trade following the strong gains and uncertainty on the margin front,” he added.