No Growth In Costco Wholesale Corporation (NASDAQ:COST)’s 3Q Comps Explained

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Costco Wholesale Corporation (NASDAQ:COST) reported a modest uptick in F3Q2016 revenue and EPS, but the topline figure fell short of the consensus estimate. But it was no growth of U.S. comparable sales that grabbed much attention. F3Q2016 marked the first time in six years that Costco’s sales at stores open for at least a year failed to move upward even an inch.

What’s taking the blame?

Costco Wholesale Corporation (NASDAQ:COST) management cited a number of factors as the cause for the flat growth in its F3Q2016 comps. The company said that soft sales during the month of April were a major contributor to the adverse impact on comps. As for weak April sales, trouble started with unseasonably cold weather during the month.

The other major cause of comp growth miss during F3Q2016 was disruptions arising from chances in the retailer’s branded card partner. Costco booted American Express Company (NYSE:AXP) as its card partner and brought Visa Inc (NYSE:V) on board. But the shift seems to have weighed negatively on comparable store sales in the F3Q ended May 8.

A decline in spending by high-income customers also hurt Costco Wholesale Corporation (NASDAQ:COST)’s comp sales during the quarter. It is worth pointing out that high-income shoppers account for about 3.6% of Costco’s core customer base. That explains why a pullback in the segment leads a massive adverse impact on sales.

What happened on the comp side?

While Costco’s U.S. comparable store sales remained flat in F3Q2016, analysts on the average expected the metric to grow by 1.9% during the quarter.

Adjusted metrics

When you adjust for impacts such as currency fluctuation, you find that Costco’s comp sales in F3Q2016 rose 3%. But that was still short of a growth of 4.6% the analysts projected.

F3Q2016 in numbers

Costco Wholesale Corporation (NASDAQ:COST) generated revenue of $26.77 billion in F3Q2016, indicating a growth of 2.6% over a corresponding quarter in 2015. Net income attributable to the company was recorded as $545 million or $1.24 per share. That was better than $516 million or $1.17 per share in the year ago quarter.

Although Costco Wholesale Corporation (NASDAQ:COST)’s EPS of $1.24 surpassed the estimate of $1.22, topline missed the estimate of $27.07 billion.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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