John "Jack" Bowman is a registered investment advisor, economics educator, research analyst, and commentator from Southern California. He mostly covers macroeconomics, income-focused investments, derivatives, alternatives, and portfolio management. He is a contributing analyst for the Sungarden Investors Club on Seeking Alpha, where he, alongside leader Rob Isbitts, teach investors how to make better portfolio decisions, focusing on risk management, and total return investing. Jack applies the crossover of ...

Group 1 - Traditional supermarkets are increasingly adopting an "online + offline" model to enhance revenue and improve customer engagement through instant retail and social e-commerce [1][2] - High Xin Retail reported a significant turnaround in profitability for the fiscal year ending March 31, 2025, with a profit of 386 million and a revenue of 71.552 billion, despite a slight revenue decline of 1.4% [2] - The same-store sales for High Xin Retail grew from 0.3% in the first half of the fiscal year to 0.6% for the full year, driven by improved pricing competitiveness and product optimization [2] Group 2 - The online business of Da Run Fa covers over 20,000 SKUs, offering delivery services within 5 kilometers, with innovations like satellite warehouses to meet consumer demand [3] - Yonghui Supermarket reported online revenue of 14.6 billion, accounting for 21.7% of total revenue, with a gross margin improvement attributed to better product structure [4] - Red Flag Chain has increased collaboration with social e-commerce platforms, achieving over 1 billion in sales through frequent operations on platforms like Douyin [5] Group 3 - The supermarket industry is undergoing a transformation, with 48.9% of supermarkets reporting online sales growth, particularly in second and third-tier markets [5] - Experts suggest that instant retail is a key area for supermarkets to focus on, emphasizing the importance of product and brand integration [5][8] - The trend of closing underperforming stores is prevalent, with High Xin Retail closing 8 large stores and Yonghui closing 232 stores in 2024 [7][8] Group 4 - The restructuring of store formats is gaining momentum, with 86% of categories seeing positive growth post-restructuring, and fresh produce playing a crucial role in driving sales [9] - Yonghui plans to expand its restructuring efforts, targeting 150 stores by the end of July 2025, while other companies like Wumart are also focusing on store upgrades [10] - The industry is seeing a diversification of store formats, with companies like High Xin Retail and Wumart exploring new community store models to cater to local needs [11][12]

Group 1 - Texas Roadhouse is being compared to Costco in the restaurant industry due to its elevated trading multiples and consistent growth, showing resilience despite quarterly results [1] - The company is recognized for its strong qualitative attributes, which makes it an attractive investment opportunity [2] Group 2 - The focus is on investing in companies with solid fundamentals and holding them long-term, indicating a strategy aimed at maximizing exposure to high-performing stocks [2]

Core Viewpoint - Costco's third-quarter earnings exceeded expectations, demonstrating its resilience amid tariff challenges and economic uncertainty, supported by its scale and loyal membership base [1] Financial Performance - Costco reported third-quarter revenue of $63.2 billion, an 8.0% year-over-year increase, surpassing market expectations [1] - Earnings per share reached $4.28, exceeding analyst forecasts [1] - Membership fee income for Q3 was $1.24 billion, up from $1.12 billion in the same period last year [1] - Net profit for the quarter was $1.9 billion, compared to $1.68 billion in the previous year [1] Sales and Market Trends - Same-store sales growth, excluding fuel and currency effects, was 8% [1] - E-commerce sales increased by approximately 16%, with both online and offline traffic showing improvement [1] - Best-selling categories included gold, toys, and health and beauty products, indicating strong consumer demand despite a focus on essential goods [1] Strategic Responses to Tariffs - The CEO indicated that Costco is implementing various strategies to mitigate tariff impacts, such as sourcing products from lower-tariff countries and increasing local procurement [2] - The company is evaluating potential price adjustments on goods affected by tariffs, while maintaining prices on essential imports from Central America [2] - Recent declines in commodity costs have allowed for price reductions on core consumer goods like eggs and butter [2] Consumer Behavior and Economic Outlook - Costco's membership base is relatively affluent, providing a buffer against economic fluctuations [3] - The company has historically prioritized membership growth and customer loyalty over short-term profit margins [3] - Despite stable consumer spending, the inflationary effects of tariffs are becoming evident, particularly in categories like clothing, electronics, and home goods [3]

Market Overview - Major indexes showed positive performance with the Dow up +108 points (+0.26%), S&P 500 rising +0.40%, Nasdaq increasing +0.39%, and Russell 2000 growing +0.33% [2] - Bond yields decreased, with the 10-year yield at +4.42%, 2-year at +3.94%, and 30-year at +4.92% [2] Real Estate Sector - Pending Home Sales fell -6.3% month over month in April, significantly worse than the expected -1.0% drop, following a +5.5% increase in March [3] - The overall index for Pending Home Sales stood at +71.3, with the West and South regions experiencing the largest declines of -8.9% and -7.7% respectively [3] Company Earnings Reports - Costco reported fiscal Q3 earnings of $4.28 per share, exceeding expectations by $0.05, with revenues of $63.2 billion, an 8% year-over-year increase [4][5] - The Gap's shares fell -17% despite beating earnings estimates with $0.51 per share on revenues of $3.5 billion, as tariffs could cost the company $100-150 million [5] - Dell Technologies reported Q1 earnings of $1.55 per share, missing expectations but showing a +17% year-over-year growth, with Infrastructure Solutions up +12% [6] - Marvell Technology narrowly beat earnings expectations with $0.62 per share and $1.89 billion in revenues, a record high, and raised next-quarter guidance [7] - Ulta Beauty reported earnings of $6.70 per share, surpassing expectations of $5.77, with revenues of $2.85 billion exceeding the $2.80 billion forecast [9]

Financial Performance - For the quarter ended May 2025, Costco reported revenue of $63.21 billion, an increase of 8% year-over-year [1] - EPS for the quarter was $4.28, up from $3.78 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $63.14 billion by 0.10%, and EPS also surpassed the consensus estimate of $4.25 by 0.71% [1] Key Metrics - Comparable sales for the total company increased by 5.7%, exceeding the average estimate of 5.4% from seven analysts [4] - Excluding the impact of foreign currency and gasoline prices, comparable sales for the total company rose by 8%, compared to the average estimate of 6.8% [4] - The number of warehouses worldwide was 905, slightly below the average estimate of 906 [4] - In the U.S. and Puerto Rico, the number of warehouses was 624, above the estimated 622 [4] Regional Performance - Comparable sales in the U.S. were up 6.6%, surpassing the average estimate of 5.5% [4] - Comparable sales excluding foreign currency and gasoline prices in the U.S. increased by 7.9%, compared to the average estimate of 6% [4] - Comparable sales in Canada were 2.9%, below the average estimate of 6% [4] - Comparable sales for Other International regions were 3.2%, below the average estimate of 5.6% [4] Membership Revenue - Membership fees revenue was reported at $1.24 billion, matching the average estimate from nine analysts and representing a year-over-year increase of 10.4% [4] - Net sales revenue was $61.97 billion, slightly below the average estimate of $62.05 billion, but still reflecting an 8% increase compared to the previous year [4] Stock Performance - Costco shares returned +1.9% over the past month, while the Zacks S&P 500 composite increased by +6.7% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Data and Key Metrics Changes - Net income for Q3 was $1.9 billion or $4.28 per diluted share, up more than 13% from $1.68 billion or $3.78 per diluted share in the same quarter last year [13] - Net sales for Q3 were $61.96 billion, an increase of 8% from $57.39 billion in the same quarter last year [15] - Membership fee income was $1.24 billion, an increase of $117 million or 10.4% year over year [18] - Gross margin rate increased by 41 basis points to 11.25% compared to 10.84% last year [21] - SG&A rate was higher by 20 basis points at 9.16% compared to 8.96% last year [25] Business Line Data and Key Metrics Changes - Fresh category comparable sales were up high single digits, led by double-digit growth in meat [29] - Non-foods also had comparable sales in the high single digits [29] - E-commerce comparable sales were up 14.8% or 15.7% adjusted for foreign exchange [16] - Gas comps were negative low double digits due to lower average price per gallon [32] Market Data and Key Metrics Changes - U.S. comparable sales were up 6.6% or 7.9% excluding gas deflation [15] - Canada comparable sales were up 2.9% or 7.8% adjusted for gas deflation and foreign exchange [15] - Other international comparable sales were up 3.2% or 8.5% adjusted [15] - Traffic increased by 5.2% worldwide and 5.5% in the U.S. [17] Company Strategy and Development Direction - The company plans to open another 10 warehouses in Q4, bringing the total to 914 worldwide [6] - Focus on maintaining competitive pricing despite macroeconomic challenges [7] - Continued investment in digital and technology to enhance member experience [10] - Strategic sourcing to mitigate tariff impacts and lower costs [9][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate challenges posed by tariffs and inflation [12] - The company remains committed to providing quality items at the lowest possible prices [35] - Management noted that in uncertain times, value resonates strongly with members [12] Other Important Information - Capital expenditure in Q3 was approximately $1.13 billion, with an estimated full-year CapEx of over $5 billion [29] - The company ended Q3 with 79.6 million paid household members, up 6.8% year over year [20] Q&A Session Summary Question: What is Costco's current pricing strategy given the market conditions? - Management indicated that they are focused on lowering prices wherever possible and have seen improvements in the competitive landscape [42][43] Question: How has the company managed inventory in light of tariffs? - Management noted proactive measures to pull forward inventory to mitigate tariff impacts and maintain pricing [49] Question: What should be expected regarding growth in non-food categories? - Management acknowledged that while growth is strong, there may be a deceleration as they cycle tougher comparisons from the previous year [60] Question: How is the company addressing member experience in high-volume warehouses? - Management is strategically opening new warehouses to alleviate congestion and improve member experience [63][64] Question: What is the outlook for LIFO charges in the upcoming quarters? - Management provided estimates for LIFO charges based on current inflation rates, indicating a potential increase in Q4 [81][84]

Financial Data and Key Metrics Changes - Net income for Q3 was $1.9 billion or $4.28 per diluted share, up more than 13% from $1.68 billion or $3.78 per diluted share in the same quarter last year [12][13] - Net sales for Q3 were $61.96 billion, an increase of 8% from $57.39 billion in the same quarter last year [14] - Membership fee income was $1.24 billion, an increase of $117 million or 10.4% year over year [17] Business Line Data and Key Metrics Changes - U.S. comparable sales were up 6.6% or 7.9% excluding gas deflation, while Canada comp sales were up 2.9% or 7.8% adjusted for gas deflation and FX [14] - E-commerce comp sales were up 14.8% or 15.7% adjusted for FX [15] - Fresh category comparable sales were up high single digits, led by double-digit growth in meat [28] Market Data and Key Metrics Changes - Traffic or shopping frequency increased 5.2% worldwide and 5.5% in the U.S. [15] - Average transaction or ticket was up 0.4% worldwide and up 1.1% in the U.S. [16] - Gas comps were negative low double digits during the quarter, driven by a lower average price per gallon [32] Company Strategy and Development Direction - The company plans to open another 10 warehouses during Q4, including locations in Sweden, Korea, and Canada, bringing the total warehouse count to 914 worldwide [5] - The focus on digital and technology is seen as crucial for future growth, with investments aimed at improving member experience [9][10] - The company is committed to providing quality items at the lowest possible prices, viewing price increases as a last resort [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate challenges posed by tariffs and inflation, emphasizing the importance of maintaining competitive pricing [11][35] - The company noted that in uncertain times, its value proposition resonates strongly with members [11] - Management highlighted the importance of agility in sourcing and pricing strategies to mitigate tariff impacts [35] Other Important Information - Membership renewal rates were 92.7% in the U.S. and Canada, with a worldwide rate of 90.2% [18] - The company ended Q3 with 79.6 million paid household members, up 6.8% year over year [20] - Capital expenditure in Q3 was approximately $1.13 billion, with an estimated full-year CapEx of over $5 billion [28] Q&A Session Summary Question: What is Costco telling merchants regarding pricing strategy? - Management indicated that they are focused on lowering prices wherever possible and have seen improvements in the competitive landscape [41][43] Question: How are price gaps changing in the current inflationary environment? - Management noted that they are closely monitoring pricing and have been proactive in lowering prices as commodity costs decrease [46][48] Question: How should expectations be recalibrated as Costco laps outsized growth from precious metals and gift cards? - Management acknowledged that some deceleration in growth is expected but remains confident in the ability to find quality items at great value [55][61] Question: What is being done to improve member experience in high-volume warehouses? - Management emphasized strategic openings of new warehouses to alleviate congestion and improve member experience [62][65] Question: What is the outlook for LIFO charges in the coming quarters? - Management provided insights into the LIFO charge calculations and indicated that future charges will depend on inflation rates and tariff impacts [76][82]

Sales Performance - Net sales reached $62.0 billion, representing an 8.0% growth [4] - Comparable sales increased by 5.7% [4] - Comparable ticket increased by 0.4% and adjusted comparable ticket increased by 2.7% [6] - Comparable traffic increased by 5.2% [4] - E-commerce comparable sales grew by 14.8%, with adjusted e-commerce comparable sales up by 15.7% [4] Segment Reporting - US comparable sales increased by 6.6%, Canada by 2.9%, and Other International by 3.2% [8] - Adjusted US comparable sales increased by 7.9%, Canada by 7.8%, and Other International by 8.5% [8] Financial Performance - Gross margin increased by 41 bps to 11.25% [9] - Net income reached $1.90 billion, a 13.2% growth [9] - Diluted EPS reached $4.28, a 13.2% growth [9] - SG&A decreased by 20 bps to 9.16% [9] Membership Metrics - Membership income grew by 10.4%, or 11.4% excluding FX impacts [11] - Worldwide membership renewal rate was 90.2%, with US/CN renewal rate at 92.7% [11] - Paid memberships reached 79.6 million, a 6.8% growth [13] - Total cardholders reached 142.8 million, a 6.6% growth [13] - Executive memberships totaled 37.6 million, with 73.1% penetration of sales to executive members [13] Digital Performance - E-commerce comparable sales increased by 14.8%, with adjusted e-commerce comparable sales up by 15.7% [16] - Site traffic increased by 20%, and average order value increased by 3% [17] - Costco Logistics deliveries increased by 31% [17] Warehouse Expansion - The company plans to expand to a total of 914 warehouses by the end of FY25 [20] - 8 new warehouses were opened in Q3 FY25 [20]

The sign on the side of a Costco is seen in Hawthorne, California, on April 4, 2025.Costco on Thursday posted quarterly earnings and revenue that topped estimates as its sales climbed 8%. Here's how the warehouse club retailer did in its fiscal third quarter compared what Wall Street was expecting, based on a survey of analysts by LSEG:Earnings per share: $4.28 vs. $4.24 expectedRevenue: $63.21 billion vs. $63.19 billion expectedCostco's net income for the three-month period that ended May 11 rose to $1.90 ...