Costco (COST) Q2 Earnings Missed Expectations On Higher Costs

Costco Wholesale Corp. (NASDAQ:COST) was formed in 1993 as a result of a merger between Costco and Price Club. It is a membership warehouse club engaged in offering quality brand-name merchandise at affordable prices to its members. The company has hundreds of locations across eight countries, offering a wide range of merchandise. Costco has a loyal customer base due to its membership model. It operates on lower gross margins as compared to conventional retailers, allowing it to offer products at cheaper prices than rivals. Moreover, it is famous for providing relatively higher wages and better benefits to its employees.

The company performed well over the last year despite the difficult operating environment. Costco, being an essential retailer, sells consumer staples such as groceries and cleaning products. The pandemic drove sales of essential items at Costco, as people purchased the goods in bulk. As a result, Costco’s stock price rose nearly 30 percent during 2020.

Nevertheless, the company’s second-quarter earnings missed expectation, as increased wages and benefits to employees during the Covid-19 crisis weighed on the overall profitability. Costco reported earnings of $2.14 per share for the three months ended February 14, versus $2.10 per share in the comparable period of 2020. Comparatively, analysts on average were looking for a profit of $2.45 per share.

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Revenue increased 14.7 percent on a year-over-year basis to $44.77 billion, beating the consensus forecast of $43.78 billion. Comparable sales in the quarter rose 13 percent, while online climbed 76 percent.

Costco also offered sales numbers for the month of February 2021. Its net sales for February came in at $14.05 billion, representing a surge of 15.2 percent from the comparable month of 2020.

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