Costco shares slip after quarterly earnings report

they are lower in overtime by just over 4% at the moment after missing Revenue estimates when they reported just moments ago joining us now to discuss is Arun sunderam senior equity research analyst at CF research Aron this is a name that's been uh running quite strong expectations are high is there a problem here yeah hey John no I didn't see any problem with this report actually thought it was a pretty good um you know earnings uh you know comp sales are up 5.8% that's excluding fuel that's ac

tually a step up from their fiscal first quarter of 3.9% uh membersip free income was up 8% I think it's a solid number uh you saw strong digital or e-commerce sales growth as well um you know the stock is run up a lot uh recently so I think expectations were really high so you just really needed a you know a really strong earnings to support uh this Rich valuation um and you know uh while the results were good you know if I was going to be nitpicky you know we did see you know operating margins

were about 3.6% we were expecting about 3.7% operating margins uh it looks like gross margins didn't expand as much as we thought it would so there might be some questions on whether Costco is investing in price to drive more traffic uh things like that but we'll hear more about that on the call today yeah that's exactly where I was going with you run is it is pricing power and whether we've hit a ceiling uh at a at a place like Costco as we've heard so many others across the industry basically

comment on and how you balance that versus costs coming down internally at the company too yeah so I mean Costco is one of those retailers they're you know typically last to raise prices and first to lower prices so now that inflation is moderating and we're actually seeing deflation in a lot of discretionary Goods uh we sense Costco is lowering prices especially you know on those discretionary Goods like you know Furniture TVs uh things like that and that's you know going to drive more store t

raffic and most importantly it's going to drive membership income and their renewal rates uh you have to remember Costco's model only works when uh they continue to gain new members and keep those members and right now the renewal rates in the US in Canada around 93% uh which is really strong so um you know nothing to nothing to worry about uh at at this point