To The Moon

$Costco (COST)$ reported its Q4 FY2024 results after the 26th after-hours, and the overall performance has been fair, with basically little volatility after-hours.The company's shares are higher and the main trading force has been institutional as well.

Earnings Performance

• Revenues of $79.70 billion, up 1.0% year-over-year and slightly below market expectations of $79.96 billion.

• Same-store sales growth increased 6.9% overall, above market expectations of 6.4%, with same-store growth in North America of 6.3%, above expectations of 6.0%, and same-store +9.3% in overseas territories, above market expectations of 8.6%.

• Same-store sales growth including fuel was 5.4%, above market expectations of 4.27%, including +5.3% in North America, above market expectations of 5.14

• Gross margin 10.99%, above market expectations of 10.82

• Inventory growth rate of 11.99%, higher than the market's expectation of 3.04%

Membership Business

• Membership reached 136 million, of which 76.2 million were paid members and 60.6 million were family members, with a renewal rate of 92.4%.

• Membership fee revenue reached US$1.34 billion, up 6.3% year-on-year.

Segmentation

• Mobile sales accounted for 55% of e-commerce sales

• Canadian and Mexican markets performed well

• Food & Household Goods: continued to drive sales growth and was a major contributor.

• E-commerce: accounted for 8.1% of total sales, up 18.9% year-on-year, slightly below expectations of 19.6%, but sales declined in certain categories such as home furnishings.

In terms of costs and shareholder returns

• Selling, general and administrative expenses were 9.8 percent of sales, down 0.1 percentage points from the prior year period

• Cash flow from operating activities of $1.68 billion

• Cash dividends of $870 million

• Share repurchases of $510 million

Outlook

• Q1 same-store sales are expected to continue to grow positively, but the growth rate may be affected by seasonal factors and competitive pressures.Meanwhile, inventory will continue to be optimized to cope with potential market volatility.

• For the full year 2025, new stores are planned to be opened in the coming year to further increase market share.Meanwhile, investment in e-commerce platforms will be increased to adapt to changes in consumer shopping habits.

Investment Highlights

Competitive Pressure

• Price investments and increased e-commerce and online sales by other retailers, such as $Amazon.com(AMZN)$ , $Wal-Mart(WMT)$ and $Target(TGT)$ , also pose a significant competitive threat to the Company

• The emergence of alternative shopping platforms such as Instacart and $Uber(UBER)$ Eats, which are emerging grocery delivery services, may affect Costco's market share.

• Costco's policy of capping gross margins maintains margins between 14% and 15%.

• This strategy, while historically effective, limits the company's ability to maximize profitability in the face of inflationary pressures and rising costs

E-Commerce Growth Slows

• Large discretionary segments such as home furnishings and small appliances declined 15% in the quarter and accounted for 58% of e-commerce sales

• While certain categories underperformed, the overall e-commerce strategy remains on track and will continue to invest in digital platforms to enhance the customer experience.

• Management believes there is still significant potential in international markets, particularly in regions such as Canada and Mexico, and will continue to increase investment

Inventory and Costs

• While the overall inventory position is good, there are still some categories that are slightly overstretched

• Inventory levels have improved from the previous 26% rise, but still need to be closely monitored.

• The company's management has indicated that it will mitigate these pressures through supply chain optimization and cost control measures, while maintaining competitiveness.