Stocks Fell Even with Impressive Costco Sales
The retail firm’s stocks fell even with better-than-expected earnings.
Costco’s stocks dipped by 2.6% after reporting its quarterly results for the period ending August 31. Shares further went down by 3% in the extended trading hours.
Same-store Costco sales in the fourth quarter grew by 11.3%. This is the firm’s largest gain in about 20 years.
Earnings per share of $3.13 beat analyst expectations of $2.85. Similarly, e-commerce also skyrocketed by 90.6%.
As much as Costco’s sales left everyone impressed, its pandemic-related spending outpaced the pleasant atmosphere that the earnings report brought.
The membership chain spent $281 million on employee incentives and sanitizing its warehouses to curb the virus’s spread and assure customers of their safety within Costco’s premises.
In May, the company estimated that COVID-19 related costs could exceed $100 million.
This is a much modest figure from expenditures recorded in two consecutive quarters, amounting to $283 million in the third quarter and $281 for the latest report.
To compensate employees, the company gave out a $2 an hour hazard pay premium. This quickly piled up to a weekly bonus cost of $14 million per week.
Costco’s Warehouse Traffic and Membership Premium
The high spending cost weighed down the firm’s shares as investors grew anxious about Costco’s ability to yield more significant revenue should it continue to employ a similar scheme.
To be fair, the retail giant’s considerate move helped it go under the scrutiny of the public like what other retail giants go through at the moment.
Amazon.com Inc and Kroger Co are currently under fire after reports showed that both juggernaut retailers stopped giving out hazard pay for their employees.
Along with impressive same-store and e-commerce Costco sales, foot traffic in wholesale warehouses also picked up during the quarter.
This is a significant jump from April figures that experienced a 20% drop.
Similarly, revenue from membership also rose by 5.3% to $1.11 billion. To add another good news, in-store food samples are now back on track.
