By Juveria Tabassum and Nicholas P. Brown
May 28 (Reuters) - Costco Wholesale reaped the spoils of surging gas prices, as more consumers sought out its lower-priced fuel, helping it top market expectations for third-quarter U.S. sales.
Just as Walmart last week topped sales expectations while warning that consumer spending remains stressed from inflation, Costco painted a picture of a budget-conscious consumer driven to its members-only wholesale club as price anxiety rises.
The final five weeks of
the quarter were Costco's highest ever in terms of sales volume, CEO Ron Vachris said on an earnings conference call on Thursday.
Gas prices exceeding $4 per gallon — on the rise as the Iran War drags on — drove many Costco members to use its gas stations for the first time, Vachris said. That could be a boon, as members who use Costco gas stations typically spend more in the warehouse, he said.
Costco's shares have risen about 15% so far this year, compared with an 8% rise in the S&P 500 Consumer Staples index. They were unchanged in extended trading.
"The fact that consumers are still flocking to its warehouses ... proves that Costco's value proposition is practically bulletproof," said David Wagner, head of equity and portfolio manager at Aptus Capital Advisors.
Including gas, U.S. comparable sales jumped 9.4%, beating analysts' estimate of a near 7% rise, according to data compiled by LSEG.
Costco said it has also maintained lower prices on beef, which, along with higher transportation costs, affected its margin in the third quarter.
TARIFF REFUNDS COULD PASS TO CONSUMERS
Costco is applying for refunds from President Donald Trump's tariffs, which were invalidated earlier this year by the U.S. Supreme Court, Vachris said. He expects refunds to start flowing on a rolling basis in the next two to three months.
Vachris reiterated that refunds from tariffs will pass on to the consumer in some form. "How much we return, and when, depends on a variety of factors, including how much refund money we receive and when it arrives, as well as developments in the lawsuit filed against the company regarding the return process," Vachris said.
He was referring to a March class action filed against Costco by customers seeking a share of refunds.
Costco's total quarterly revenue rose 12% to $70.53 billion, beating the estimate of $69.81 billion.
Its net income jumped 15% to $2.19 billion, while adjusted earnings per share of $4.93 came in line with expectations.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Shilpi Majumdar)
