Costco’s Q4 not as strong as earlier earnings, but still solid

Grocery, pharmacy, and health and beauty all played roles in Costco’s solid fourth quarter, but the real star continues to be nonfood.

Comparable sales in the U.S. were up 5.3% year over year in Q4 while ecommerce increased 18.9%.

Net sales were $78.2 billion, up 1% versus the 17-week fourth quarter a year ago, while net income came in at just over $2.3 billion. For the 52-week fiscal year, the Issaquah, Wash.-based retailer reported net sales of $249.6 billion, a boost of 5% year over year.

Costco’s stock price ended the day of trading down 6.98% on Thursday.

“I would say overall we feel very good about our momentum ending fiscal year ’24 and as we head into the new fiscal year, we feel very good about the opportunity ahead of us,” said Costco Executive Vice President and CFO Gary Millerchip during the earnings call Thursday.

Nonfood had the highest comparable sales in Q4, with Costco’s fresh department posting single-digit year-over-year growth. An expanded and elevated health and beauty category also performed well while pharmacy experienced double-digit growth.

Kirkland Signature boneless chicken tenderloins gave grocery a boost for the retailer. The retailer had dropped the price of the product 13%, which made the chicken a major contributor towards the 21% lift in pounds sold in the food and sundries category, according to Millerchip.

Ethnic food also helped in the grocery sector as Costco introduced more international products like paneer cheese and fried tofu kimbap. Kirkland Signature’s golden maple syrup and aerosol whipped cream also sold well.

“Kirkland Signature offers significant member value compared to the national brands and continues to grow at a faster pace than our business as a whole,” Millerchip said during the call.

Millerchip added that inflation continues to subside and was flat overall for the warehouse retailer, though produce did experience a slight price increase.

Traffic and shopping frequency increased 5.6% year over year in Q4. The average ticket less fuel was up 0.6% domestically.

Costco initiated its first membership fee increase in seven years on Sept. 1—revenue that did not count toward Q4. The cost of basic annual membership increased $5 to $65, and Costco’s Executive Membership increased $10 to $130 annually. Costco brought in over $1.5 billion in membership dues in the fourth quarter, and Millerchip said the increase will be felt in the back end of fiscal year 2025.

About half of the new membership signups during fiscal year 2024 have come from people under the age of 40.

“The percentage has been growing since COVID and has lowered the average age of our member over the last few years,” Millerchip said.

In August, Costco began rolling out card scanners at the entrance of warehouses, and about 350 locations now have the technology. The retailer cites the scanners as contributing to a lift in membership signups and renewals. Costco CEO Ron Vachris said the tech gives operators real-time traffic counts throughout the day, and associates can monitor fresh foods more effectively because they know the traffic counts.