Costco Shares Tumbled Despite Upbeat Earnings Report on Basics Inflation Concerns

Despite decent quarterly financial results, shares Costco (COST) fell 1.3% after the close on Tuesday, September 26, after the company reported better-than-expected Q4 earnings and revenue. Earnings per share of $4.86 topped estimates of $4.78, while revenue of $78.94 billion topped analysts' average estimate of $77.72 billion.

Over the reporting period, comparable sales, including gasoline and foreign exchange, rose 1.1%, above expectations of 1.87%; comparable sales excluding gasoline and foreign exchange rose 3.1%, above expectations of 3.29%. Also in terms of Q4 comp sales metrics, traffic or shopping frequency increased 5.2% worldwide and 5.0% in the United States. Costco’s average transaction, or shopping ticket, was down 3.9% worldwide and down 4.5% in the U.S., impacted largely by weakness in bigger ticket non-foods discretionary items, as well as the gas price deflation.

During Costco's earnings call, management noted that inflation is trending down in the current quarter.