Costco (COST) stock fell on Friday after the wholesale retailer reported mixed results for its fiscal second quarter, showing shoppers remain cautious about their spending.
Adjusted earnings per share came in at $4.02, compared to Bloomberg consensus estimates of $4.11. Revenue of $63.72 billion slightly beat expectations of $63.01 billion.
Overall same-store sales jumped 6.8%, versus the 6.38% expected, though they fell short of estimates in Canada and other international markets. Same-store sales excluding fuel and the impact from foreign exchange are up 9.1%.
Costco stock fell slightly in after-hours trading Thursday and extended losses Friday, with shares declining more than 6% early in the session. Year to date, shares are up 4.8% versus a 2.5% decline for the S&P 500 (^GSPC).
CEO Ron Vachris said on Costco’s earnings call, “Our operations and merchandising teams did a fantastic job in the quarter, delivering strong operating results despite the uncertain macro environment.”
Costco consumers are still focused on “quality, value, and newness, as they have been for quite some time,” CFO Gary Millerchip added. He said shoppers are willing to spend but remain “very choiceful,” a trend he expects to ramp up given “the impact of some return of inflation and the potential impact of tariffs.”
Read more: What Trump’s tariffs mean for the economy and your wallet
Shares of its peers are also outperforming as consumers seek the biggest bang for their buck. BJ’s Wholesale Club (BJ) stock is up 28% this year, while Walmart (WMT), which owns Sam’s Club, is up 5.6%.
On Thursday morning, BJ’s beat the Street’s expectations on earnings and same store sales, with a slight miss on revenue. CEO Robert Eddy attributed the results to strength in traffic, increased basket sizes, and strong member engagement.
Shares of Kroger (KR), which is facing a CEO change and the fallout from its failed merger with Albertsons (ACI), are up nearly 3% year to date. Kroger reported fourth quarter earnings that matched estimates, with a beat on same-store sales and a slight miss on revenue. Digital sales fueled the growth, followed by its delivery network and health and wellness.
Bank of America analyst Robert Ohmes is still bullish Costco’s stock has more room to run.
“We reiterate Buy and expect COST to gain share in the current environment as consumers continue to adjust to higher prices, making COST’s value proposition more attractive,” he wrote in a client note after the earnings.
Here’s what Costco shared in its fiscal second quarter results, versus Bloomberg consensus estimates:
Revenue: $63.72 billion versus $63.01 billion
Adjusted earnings per share: $4.02 versus $4.11
Total company comparable sales growth: 6.8%, versus 6.38%
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US same-store sales growth: 8.3%, versus 6.22%
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Canada same-store sales growth: 4.6%, versus 4.73%
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Other international sales growth: 1.7%, versus 4%
E-commerce growth: 22.9% versus 15%
Membership fee revenue: $1.19 billion versus $1.22 billion
Same-store sales of gold and jewelry, gift cards, toys, housewares, appliances, sporting goods, home furnishings, and small electronics grew by double digits in the quarter, whereas fresh food increased by high single digits.
The company said fresh groceries were “the most inflationary” category, driven higher by meat and bakery goods. The big jump in egg pricing is offsetting deflation in other baking ingredients like sugar, butter, and flour.
“It’s really eggs that’s causing the major pain there,” Millerchip said. Other inflationary items included cocoa, coffee, cheese, and corn.
On Thursday, President Trump extended a one-month tariff exemption to some goods and services imported from Canada and Mexico.
Goods compliant with the United States-Mexico-Canada-Agreement (USMCA) will not face 25% tariffs, while non-compliant goods will still pay the duties. The exemption is scheduled to expire on April 2, when Trump is expected to announce his reciprocal tariff plan.
Vachris said on the call that “it is difficult to predict the impact of tariffs, but our team remains agile and our goal will be to minimize the impact of related cost increases to our members.”
He added that one-third of its sales in the US are imported from other countries, and less than half of those are items coming from China, Mexico, and Canada.
“In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices and our teams will continue to rise to this challenge by leveraging our global buying power, strong supplier relationships, and innovation,” Vachris said.
Millerchip said “an increased cost during the quarter” came from supply chains due to buying more inventory.
He added, “We think [it] will be helpful as you think about some of the unpredictability that we’ve seen in supply chain timing, and also with the potential risk around tariffs.”
Also on investors’ minds was the pushback from consumers to a change in diversity, equity, and inclusion (DEI) policies.
For the week of Feb. 24, Walmart and Target’s (TGT) foot traffic was down 0.6% and 4.7% year over year, respectively, according to Placer.ai. Both have stepped back from their DEI initiatives. Meanwhile, traffic at Costco — which has reaffirmed its support for DEI policies — was up 6.7% year over year.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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