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Costco's 2Q 2024 Earnings Analyst Q&A Session Provides Insight Into Company Performance And Market Dynamics

Published 11/06/2024, 14:33
Updated 11/06/2024, 15:40
© Reuters.  Costco\'s 2Q 2024 Earnings Analyst Q&A Session Provides Insight Into Company Performance And Market Dynamics
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Benzinga - by Tornado, Benzinga Contributor.

The following is the Analyst Q&A from Costco’s (NASDAQ: COST) 2Q 2024 earnings call:

  • Question about membership fee increase strategy:
Response: Costco historically reviews membership fee increases every 5 years, currently beyond typical cycle.

No immediate plans to increase fees; focus on delivering value and monitoring business performance.

Fee increase is a matter of "when" rather than "if," but timing is still under consideration

  • Question on U.S. expansion and warehouse openings:
Response: U.S. expansion continues with good runway for more warehouses.

Membership renewal rates increase with new openings.

Growth opportunities also seen in international markets.

  • Question on price investments in response to competitors:
Response: Costco maintains daily competitive pricing as part of its DNA.

No need for sizable price investments; confident in current positioning.

  • Question on evolution of Costco's model and technology use:
Response: Costco is expanding buy online, pickup in warehouse offerings.

Technology is a key priority for enhancing member engagement and driving business.

Data and retail media seen as significant opportunities for growth.

  • Question on gross margin ceiling adherence:
Response: Costco adheres to a 14%-15% margin ceiling as part of its core strategy.

No plans to change this approach; focus remains on aggressive pricing for value delivery.

  • Question on digital and e-commerce strategy:
Response: Costco's strength in e-commerce is merchandise and value.

Focus on foundational improvements for better fulfillment and reliability.

Personalization and integration of warehouse and online offerings are opportunities.

  • Question on discretionary sales and member spending:
Response: Discretionary spend indicates members are willing to spend on wants, not just needs.

Categories like Home, Toys, and Sporting Goods are leading due to exciting merchandise.

  • Question on leadership changes and potential strategy shifts:
Response: No major changes planned; proven strategy will continue.

Innovation and adaptation to member needs will persist.

  • Question on vertical sourcing strategy:
Response: Vertical sourcing is strategic and based on need.

Focus on partnerships and stepping in where necessary, but no major expansions announced.

  • Question on Instacart gift cards and strategy:
Response: Strategy is to bring additional value to members.

Partnership with Instacart and Uber expands delivery options and member engagement.

  • Question on warehouse cannibalization and new openings:
Response: Strategic cannibalization is managed with data to adjust for impact.

International expansion continues with some regions taking longer for new openings.

  • Question on SG&A rate potential decrease:
Response: SG&A rate improvement is possible with continued top-line growth.

Warehouse efficiency and technology can drive down SG&A rate.

  • Question on gas gallons growth and impact on traffic:
Response: Gas gallons were up 5% for the quarter, contributing to traffic.

  • Question on unit growth acceleration potential:
Response: Unit growth of 25-30 new locations is solid; strategic infill and international expansion are key.

  • Question on Uber partnership and multi-provider delivery strategy:
Response: Uber partnership opens new member engagement opportunities and international expansion.

  • Question on non-foods innovation and competitive environment:
Response: Non-foods driven by unique items and great values.

Costco is competitive and gaining market share in various categories.

  • Question on Costco Logistics growth drivers:
Response: 28% increase driven by appliances, furnishings, and outdoor categories.

Costco Logistics only delivers for Costco members, no partnerships included in reported growth.

  • Question on Costco Next and marketplace model:
Response: Costco Next seen as significant growth driver and opportunity to expand offerings.

Marketplace will be curated to maintain unique and valuable offerings for members.

This article was created with assistance from Tornado’s AI platform (ai.tornado.com).

For more information, visit Tornado.com

All views expressed in this article are the authors' own and do not necessarily reflect the position of Nvstr Financial LLC dba Tornado (“Tornado”) or its affiliates. This communication is for discussion purposes only. Neither Tornado nor the authors endorse any linked content. Statements herein may not be representative of the typical experience of Tornado customers and are no guarantee of future performance or success. The contents of this article and of tornado.com are not investment advice or a recommendation of a securities transaction or investment strategy. Some Tornado content is prepared with assistance from generative AI technology. This is not an order, solicitation, or offer to buy or sell securities or business interests. Investing in stocks is inherently risky; using margin may increase these risks.

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