Friday's Headlines: Costco Beats the Economic Blues
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Trip.com Group (TCOM) +4.8%
Salesforce (CRM) +1.7%
Microsoft (MSFT) +0.8%
FedEx (FDX) +0.8%
Moving Down ⬇️
Stitch Fix (SFIX) -13.9%
Trupanion (TRUP) -9.4%
Airbnb (ABNB) -9.0%
FactSet (FDS) -8.3%
Redfin (RDFN) -7.9%
Costco Falls Despite Strong Quarter 💪
The home of $1.50 hot dogs and everyone’s favorite rotisserie chicken announced its quarterly results last night and it managed to top Wall Street’s estimates.
Costco's (COST) total revenue rose 15% to $72.10 billion in the fourth quarter, beating estimates of $72.04 billion. Excluding items, Costco earned $4.20 per share, topping estimates of $4.17 per share. This surge was prompted by strong demand for fresh food, candies, and fuel offerings.
Membership renewal rates for the quarter were also eye-catching, reaching all-time highs. U.S. and Canada renewal rates came in at 92.6%, while worldwide rates sat at 90.4%.
However, pessimistic investors found something to be unhappy about. Costco’s gross margin came in at 10.18%, compared to 10.92%, a year earlier. Management stated this was caused by higher freight and labor costs due to rising inflation and global supply chain issues.
Analysts were also spooked by an increase in total inventory, up 26% year-over-year. This has forced Costco to add some promotional sales to shift unwanted items, but so far, these efforts seem to be going well. According to Richard Galanti, Chief Finance Officer:
"Initial seasonal sales seem to be going well... would expect the 26% y-o-y increase to start to head down as it has in just the past few weeks a little bit”.
Investors punished the stock in after-hours trading, down 3% so far.
FedEx Hikes Its Prices 🔺
Shares of FedEx (FDX) were up yesterday after the company announced that it would hike its delivery rates in an effort to combat weakening demand.
Last week, FedEx stock was pummeled after scrapping its guidance for the rest of the fiscal year thanks to wider economic pressure. Now, almost a week later, we’re starting to see more of the company’s plans for weathering the economic storm with an announcement that its Express, Ground, and Home Delivery rates will increase by an average of 6.9%, while its FedEx Freight rates could increase by as much as 7.9%.
These rate increases come in addition to other cost-saving measures announced last week, which included the closure of dozens of offices, hiring freezes, and the parking of planes.
FedEx is considered a bellwether for the wider economy considering its position at the center of e-commerce and trade, so any bad news for FedEx could be considered a bad omen for the wider market too. However, investors seem pleased to see strong management in enacting measures like this to bolster its business. Now for fiscal 2023, FedEx expects total cost savings of $2.2 billion to $2.27 billion.
FactSet Falters 📉
It was a tough day on the market yesterday for FactSet (FDS) after the company posted disappointing results from its last quarter.
Reporting on its fiscal fourth-quarter and full year, the financial data and analytics company posted revenues of $433.3 million and $1.85 billion respectively, which represented year-on-year growth of 21.2% and 15.9%. It was earnings that fell below analysts' expectations though, with earnings of $3.13 for the fourth quarter coming in significantly below analyst expectations of $3.25 per share.
Still, management appeared upbeat in the earnings call, citing strong growth in retention and annual subscription value (ASV). FactSet also said it saw good growth from its continued expansion in Analytics & Trading and Research & Advisory.
FactSet is a worldwide financial services firm that provides investment data and analytics to banks and individual investors. Catering mainly to financial professionals, its flagship product combines feeds from 220 different sources so that news and trends on all types of investable instruments — including commodities, bonds, and stocks — are never more than a click away.
While the threat of passive investing is incurring on FactSet’s business, the company sees potential in focusing on the ESG sector. In yesterday’s earning call, for example, CEO Phil Snow cited that the company is now partnered with 45 ESG providers to help them aggregate data and solutions.