Costco Reports Strong Second Quarter 2022 Sales And Earnings

Costco’s second quarter net sales increased 16.1% to 50.9 billion from $43.9 billion last year. Net sales for the 24 weeks increased 16.4% to $100.4 billion from $86.2 billion last year. Net income for the quarter was $1,299 million or 2.92 per fully diluted shares.

Last year’s second quarter net income was $951 million which included $246 million pretax or $0.41 per diluted shares in costs incurred by granting employees premium wages due to Covid-19. Net income for the first 24 weeks of fiscal 2022 was $2.62 billion or $5.90 per diluted share compared to $4.76 per diluted share last year.

Comparable store sales for the second quarter 2022 were as follows: U.S. +15.85%, Canada +16.05%, Other International +6.2%, Total Company +14.4%. E-commerce accounted for 12.5% of sales.

Some of the merchandise highlighted as best sellers included jewelry, appliances and patio furniture. Of course, it was the holiday buying season.

During the investor’s meeting after the release of these earnings. Mr. Richard Galanti, CFO, stressed the difficulties of operating with delays of merchandise due to shipment and overland transportation delays. In addition, lack of labor, lack of critical supplies all contributed to requiring the company to be innovative. After having leased 3 cargo ships to expedite COSTCO merchandise more quickly to a home port, the company has added an additional 4 cargo vessels for the next three years. The company’s world-wide fleet of 828 warehouses are in urgent need of the basic merchandise that is often selling out because of the lack of regular merchandise flow.

During the analyst meeting Mr. Galanti was asked about the company’s improvement of margins, especially as price revisions had to be made. Mr. Galanti was very firm in describing Costco’s response “We want to be the lowest price operation and give people the knowledge that they are getting great values.” Inflation has driven up prices considerably. The inflation rate has risen, in Mr. Galanty’s opinion from 4.5% to 6% and customer’s expect great values.

Analysts asked when COSTCO would raise membership fees. Again Mr. Galanti told the group that Costco has raised fees seven times ln the past and is likely to raise them again. He professed not to know when that would be, but it is usually after 5½ years that management and the board considers raising rates. He did point out that the executive card, which costs $50 more, is taken by about 50% of new members, a far higher number than earlier.

The company will open about 28 warehouses this year. As indicated above it operated 828 warehouses including 572 in the United States and Puerto Rico, 105 in Canada, 40 in Mexico, 29 in the United Kingdom, 16 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two each in France and China and one in Iceland. The company also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Taiwan, Japan and Australia.

POSTSCRIPT: Costco food is fresh and its rapid turnover assures fewer markdowns as management maintains low margins, and offer great values throughout the store. The company is committed to excellent service and great values. The company’s e-commerce offerings have grown and are a boon for the homebound and aged customers.