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Costco shares spike to record high on FQ1 print

 

Monday, December 18, 2023

Today’s headlines

What’s happening: Shares of Costco Wholesale Corp gained on Friday, after the company released results for its fiscal first quarter.

What happened: The membership-only retailer reported stronger-than-expected results for its first quarter.

Costco also declared a special dividend for its shareholders, which sent its stock to a record high on Friday.

How were the results: The Issaquah, Washington-based company reported single-digit growth in sales for the quarter.

  • Net sales rose 6.1% year-over-year to $57.8 billion, topping the consensus estimates of $57.72 billion.
  • Adjusted earnings climbed 16.6% to $3.48 per share, exceeding Wall Street expectations of $3.42 per share.

Why it matters: Elevated inflation and interest rate hikes have been supporting the sales of essentials. Costco maintained low prices on these products to drive sales.

The company also reported strong growth in the sales of its consumable products, including fresh foods and its Costco Kirkland signature products. Costco also recorded stronger-than-expected sales for Black Friday and Cyber Monday.

During the recent quarter, comparable sales rose 2.6% in the US, 8.2% in Canada, and 7.1% in the other international markets. Total comps rose 3.9% year-over-year, while total ecommerce sales climbed 6.1% in the quarter.

Membership fees increased to $1.082 billion, from $1 billion in the year-ago quarter. Costco now operates 871 warehouses, versus 861 at the close of the fourth quarter.

Gross margins expanded by 43 basis points to 11.04%, with shipping costs easing from last year’s peak levels.

The company’s board approved a special cash dividend of $15 per share.

How shares responded: Costco’s shares gained 4.5% to close at $658.82 on Friday, following the release of quarterly results. The stock has jumped around 45% year to date.

What to watch: Investors will continue monitoring inflation levels and interest rates, as both are expected to impact Costco’s overall results ahead.

The markets today

The Canadian dollar will be in focus today ahead of the release of the new housing price index

Context: The CAD/USD forex pair gained on Friday, surging to its strongest level since early August.

Details: The CAD/USD forex pair benefitted from weakness in US dollar and hawkish comments from Bank of Canada Governor Tiff Macklem.

During his latest speech, Macklem said it was too early to begin considering rate cuts, as inflation in the country had remained stubbornly above the central bank’s target.

Prices of crude, one of Canada’s main exports, recovered slightly after recording strong sharp losses but still ended the trading day lower. WTI crude oil for January delivery declined 15 cents to close at $71.43 per barrel on Friday.

On the economic data front, wholesale sales in Canada fell 0.5% month-over-month in October, after a 0.6% decline in the prior month. The figure came in much lower than market estimates of 0.5% growth. Housing starts in Canada fell by 22% to 212,624 units in November, compared to market estimates of 257,100 units.

The CAD/USD forex pair rose to 1.3381 on Friday. The S&P/TSX Composite Index fell 1.2% to close at 20,529.15.

What to watch: Investors await the release of new home prices from Canada today. New home prices in Canada, which remained unchanged in October, are expected to decline 0.3% in November.

The release of inflation data this week, which is expected to impact the Bank of Canada’s monetary policy, will also remain in focus. The annual inflation rate in Canada had eased to 3.1% in October, from 3.8% in the prior month, and is expected to ease further to 2.8% in November.

Other Markets: US trading indices closed mostly higher on Friday, with the Dow Jones index and Nasdaq 100 up by 0.15% and 0.52%, respectively, and the S&P 500 down by 0.01%.

The news shaping the markets

Russia’s Defence Ministry said that they had intercepted or destroyed 35 Ukraine-launched drones over the country’s Lipetsk, Volgograd and Rostov areas. The news sent the RUB/USD forex pair higher this morning.


Singapore’s non-oil domestic exports rose by 1% year-over-year in November, missing market expectations of a 2.3% increase, which exerted pressure on the SGD/USD forex pair.


Indonesia’s motorbike sales fell by 2.8% year-over-year to 572,000 units in November, compared to a 4.0% decline in the prior month, which sent the IDE/USD pair higher in forex trading this morning.


New Zealand’s BusinessNZ performance of services index rose to 51.2 in November, versus a reading of 49.2 in October, lending support to the NZD/USD forex pair.


Colombia’s retail sales contracted 11% year-over-year in October. This being the eighth straight month of decline sent the COP/USD pair lower in forex trading this morning.

What else to watch today

Germany’s Ifo business climate indicator, Ifo business climate indicator and Ifo expectations indicator, Spain’s balance of trade, Mexico’s GDP aggregate demand and consumer spending, US NAHB/Wells Fargo housing market index, China’s foreign direct investment, as well as Central Bank of Brazil’s focus market readout.


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