Costco (COST) offers extraordinary growth and profits. Incredibly, Costco reported a 45.01% revenue growth rate for the quarter ending on 31 August 2023.
Moreover, Costco’s quarterly revenues grew from $72.091 billion on 31 August 2022 and $53.658 billion on 31 May 2023 to $78.739 billion on 31 August 2023. Similarly, Costco’s quarterly gross profit grew from $8.533 billion on 31 August 2022 and $6.473 billion on 31 May 2023 to $9.72 billion on 31 August 2023.
Plus, Costco’s quarterly operating income grew from $2.497 billion on 31 August 2022 to $1.678 billion on 31 May 2023 to $2.781 billion on 31 August 2023. Thus, Costco’s reputation for revenue and profit is intact.
Costco’s Membership Grows and Grows
Costco’s revenues, and profits are growing because its membership keeps expanding.
For example, the number of Costco (COST) members worldwide grew from 76.4 million in 2014 to 105.5 million in 2020 to 111.6 million in 2021 to 118.9 million in 2022, Statista estimates. Plus, the number of Costco memberships grew to 127.9 million on 3 September 2023, Costco claims. Hence, the number of Costco members grew by nine million between 2022 and 2023.
Costco estimates its memberships represented 71 million households on 3 September 2023. Hence, each Costco membership represents several customers.
Moreover, the memberships are an important source of revenue and cash for Costco. I estimate Costco makes $7.674 billion from $60 Business and Gold Star memberships a year.
Plus Costco operated 861 stores (they call them warehouses) worldwide on 26 August 2023. Those warehouses included 591 locations in 46 US states and Puerto Rico, 107 locations in nine Canadian provinces, 29 locations in the United Kingdom, 14 locations in Taiwan, 18 locations in South Korea, 33 locations in Japan, 15 locations in Australia, 40 locations in Mexico, two locations in France, and five locations in the People’s Republic of China. There was one location each in Iceland, Sweden, and New Zealand.
How Much Cash is Costco (COST) generating?
Costco (COST) is generating more cash from its stores and memberships. For example, Costco’s quarterly operating cash flow grew from $2.506 million on 31 August 2022 to $3.275 million on 31 August 2023.
In contrast, Costco’s quarterly ending cash flow rose from -$990 million on 31 August 2022 to $1.207 billion on 31 August 2023. However, Costco reported a $10.856 billion quarterly operating cash flow on 30 November 2022.
Importantly, Costco’s cash and short-term investments grew from $11.049 billion on 31 August 2022 to $15.234 billion on 31 August 2023. Plus Costco has added value. Its total assets grew from $64.166 billion on 31 August 2022 to $68.994 billion on 31 August 2023. Yet Costco has little debt. Its total debts fell from $6.557 billion on 31 August 2022 to $6.458 billion on 31 August 2023.
Mr. Market Overprices Costco (COST)
Despite its cash and growth, I consider Costco (COST) overpriced at $565.04 on 3 October 2023. Costco’s share price grew from $477.73 on 3 October 2022.
Not even the eight $1.02 quarterly dividends Costco had scheduled between 10 November 2023 and 12 August 2023 can justify the $571.31 share price. Costco’s stock is too expensive.
Conversely, Costco’s dividend is safe because its business registers impressive growth. Moreover, Costco grows as Amazon obliterates other retailers. I wonder if Amazon helps Costco by destroying competition and reducing trips to other stores.
For example, many people now only buy items such as underwear and small appliances on Amazon. That reduces the need for trips to the mall, making the monthly Costco run more important.
Even in the age of Amazon (AMZN). I predict Costco will keep growing and offering appealing dividends. However, I also predict Costco’s price will remain too high for the foreseeable future.
*https://www.statista.com/statistics/718406/costco-number-memberships/
*https://investor.costco.com/company-profile/default.aspx
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