Costco tops estimates as discount gas, bulk deals draw inflation-weary shoppers

Costco Wholesale reported strong financial results for the fourth quarter, surpassing analysts' estimates on Thursday. The warehouse retailer disclosed an adjusted earnings per share of $6.60, exceeding the anticipated $6.53. Quarterly revenue climbed by approximately 11% from the previous year, reaching $95.72 billion, which also surpassed Wall Street's estimates of $94.86 billion.

The company's success can be attributed to the demand for its low-price bulk model and discounted fuel offerings, which attract inflation-weary shoppers looking to stretch their household budgets. Costco's discount gas stations, which typically sell below market value, have been particularly beneficial, as they have drawn in price-sensitive customers amid soaring fuel prices due to the Iran war, according to TD Cowen analyst Oliver Chen.

Comparable sales growth, excluding gas and foreign exchange effects, rose 6.7%, surpassing analysts' expectations of 6.11%. CEO Ron Vachris highlighted that the business had a record year in terms of gasoline sales. Costco's CFO Gary Millerchip mentioned that the company received $184 million in tariff refunds during the quarter under the International Emergency Economic Powers Act, which were reinvested through price reductions on various items, including essentials, meat, beverages, and certain non-food products.

Additionally, Costco has observed an increase in average basket sizes as shoppers consolidate their trips to the store, loading up on groceries and other essentials in one visit instead of making multiple runs. Despite a stock price that remained flat in extended trading, Costco's shares have risen nearly 4% so far this year.