Will Costco Maintain Its Image of a Steady Performer in Its Q2 Results?

Costco is scheduled to post its second quarter financial results after the markets close on 2nd March. The company releases its sales numbers every month that takes out the element of drama from the quarterly releases. There are some businesses where the things can change drastically from month to month basis too, but that is quite unlikely in the case of Costco, which is a global retailer with warehouse club operations.

The measure of success and failure in case of Costco is based on long-term membership trends. Though the monthly sales figures cannot predict the renewal or the signup rates perfectly, they do give some strong hints about how things are unfolding.

The company has already told the investors that sales increased by 3% in the month of December and by 5% in January. With all macroeconomic factors remaining the same since then, it is highly unlikely that there will be any drastic change in the month of February.

The CFO of the company Richard Galanti said in his Q1 address that they are working on improving their member experience. He has emphasised that the company is focused on improving merchandise by concentrating on three main areas. These were adding high-end brands, improving stocks and high-velocity items, and some other things that he had not specified, but said they will be working on it in the first few months of 2017. The Q2 result might reflect the effect of all these measures taken by the company.

Talking about the expectations in the Q2 results, Karen Short, an analyst at Barclays’ said, “The benefit to profits from the new Visa card appear to be reflected in estimates, but there may still be upside to comps in FY 2017 given the cycling of tobacco as well as lessening headwinds from deflation.”

Membership has always been at the core of Costco. The sales number suggests both the buying by the existing ones and at the same time addition of the new members. At the end of Q1, the membership number stood at 47.9 million. In Q2, it is expected to grow more as traffic had accelerated in the United States in the recent months and the new visa card drive has also led to the increase in card use.

 

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