Costco reported their first quarter numbers today and they are looking great.
While the numbers are important, they are telling a story which fares well for their continued success. Retail is all about cementing the customer to the retailer through habit. While many retailers are currently looking to pass their inflated product costs through to their customers, Costco held the line. It further enforces that Costco provides a good value to their customers at a time when most retailers are excessively focused on THEIR bottom lines.
Year over year quarterly revenues increased 16.6%, but their gross margin increased only 11.5%. This tells me that they didn’t pass on their inflated costs. Their net margin increased 13.9%. They made up for some of their gross margin by tightening their internal operating and other costs. Per share earnings increased only 13.7%.
There was no “slight of hand” financial engineering since diluted shares and LT debt were essentially the same. Costco is one of the few companies not “pumping up the volume” (Earnings per share) with ever increasing financial leverage and share buybacks.
Good job Costco! They are a solid example of textbook smart management and excellent financial controls, all while enhancing their brand.
Be smart, be well-read, be aware and be successful.
