Costco set to release Q4 earnings, potential membership fee hike in focus

Costco Wholesale (NASDAQ:COST), the multinational corporation, is preparing to release its fourth fiscal quarter earnings after market close today, Tuesday. The report will cover a three-month period ending in August. Analysts predict adjusted earnings of $4.79 per share from sales totaling $77.7 billion, according to estimates.

The company has been consistent in providing monthly sales updates for 52 weeks of its 2022-2023 fiscal year. As such, AB Bernstein analyst Dean Rosenblum suggests that revenue surprises are unlikely. However, a slight underperformance compared to expectations might be possible due to cautious consumer behavior and sluggish comparable-store sales, which have been slowing steadily over the previous four quarters.

Comparable-store sales increased by 14.9% in the quarter ending May 2022, but by May 2023, the rise was just 3.5%. They are expected to increase by a similar percentage this quarter, analysts predict. Despite a slow start to the quarter, sales improved over the summer months, according to Evercore ISI's Greg Melich, which could result in a robust report.

In addition to financial performance, analysts suggest that other news may overshadow Costco's earnings report. One significant update could be a potential rise in Costco's annual membership fee—an action Wall Street analysts believe is overdue. Historically, Costco has increased fees approximately every five or six years with the most recent hike in 2017.

Currently, Costco charges $60 for a basic membership and $120 for an executive membership. Rosenblum suggests that now food inflation has somewhat eased, Costco may seize the opportunity to plan for a fee increase. If implemented, this move could stimulate an uptick in the company's stock value.

Costco's shares have already seen a surge this year with a 22% increase compared to the S&P 500's rise of about 13%. Melich, who rates the stock as Outperform with a price target of $600, includes Costco in his top five picks.

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