Costco’s profits beat Wall Street expectations

The big-box retailer reported earnings of $5.29 per share during the quarter ended Sept. 1, beating the average estimate of Wall Street analysts. Shares were down 1.1 percent at 6:39 p.m. in late New York trading. Shares are up 37% year-to-date through Thursday’s close.

As inflation cools, shoppers are buying more non-food items, Chief Financial Officer Gary Millerchip said on a call with analysts on Thursday. Home furnishings and tires have sold particularly well, while some products such as consumer electronics and appliances are getting cheaper.

Fresh food sales rose during the quarter, and executives said the company was cutting prices on some Kirkland-branded products such as boneless chicken tenderloin and Spanish olive oil. Manufacturers and retailers also offer more discounts to sell products.

Shopper traffic increased in the US during the quarter from a year earlier, although visitors spent slightly less per trip. Costco said it gained more paid members and about 90 percent renewed their membership during the quarter.

The company, which has already reported sales for the period in monthly releases, has historically been insulated from macroeconomic challenges, given that its buyers pay membership fees and tend to be more affluent. Comparable US sales rose 5.3% for the period. By the same measure, e-commerce grew by almost 19%.

Strike in port

Costco Chief Executive Ron Vachris said the company is preparing for a potential port strike along the US East and Gulf Coasts. Costco, which primarily imports non-food items that make up about 25 percent of its total business, is getting some holiday goods early. It also came up with contingency plans such as shipping the products to different ports.

U.S. retailers posted a mixed quarter of results, showing consumers are being selective and making compromises ahead of the holiday season. Early projections for holiday spending point to a slight increase in in-store sales and more growth in online spending.

Walmart Inc. and Target Corp. said shoppers were focusing on buying essentials but noted there were no new signs of a pullback. However, Home Depot Inc. said consumers were putting off big purchases because of economic uncertainty, while dollar stores said lower-income shoppers were under pressure.

Costco increased its membership fees in the US and Canada this month. It will likely take months to see how the change will affect renewal rates or enrollments.

(Updates stock trading and adds commentary from the company’s analyst call.)