Not if, but when.
Those words carry certainty, except for the lack of a specific time frame. The phrase could frustrate people who really want to know when exactly is when.
Take the case of big-box membership-based retailer Costco (COST) , which reported fiscal-second-quarter earnings on March 7.
The Issaquah, Wash., company has added more than $100 billion in value since the lows of October last year, driven in part by resilient consumer spending on discretionary items and expanding membership fees.
The shares had hit a record early in Thursday's session, ahead of the earnings report, which came after the market closed. At last check, however, Costco's shares were sliding 6.2% to $736.72.
Joe Feldman of Telsey Advisory Group told Yahoo Finance it “makes sense it would take a pause” after the “stock has been on fire lately.”
“The stock also has a history of taking a breather when it reports financial news. We are not concerned, given the business remains quite solid, as evidenced by the [comparisons] trend," he said.
The company posted adjusted second-quarter earnings of $3.71 a share, up from $3.30 a year earlier. Revenue totaled $58.44 billion, compared with the year-ago tally of $55.3 billion.
Analysts surveyed by FactSet were expecting Costco to earn $3.63 a share on sales of $59.20 billion.
CFO Galanti: 'Not on my watch'
Same-store sales, excluding gasoline and foreign exchange, climbed 5.8%. In the U.S. same-store-sales growth was stronger than expected at 4.8%
In addition, Costco reported membership-fee revenue of $1.11 billion, up $84 million, or 8.2%, from a year earlier.
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The company has not raised its membership fees since 2017, prompting many retail analysts to wonder when Costco will get around to boosting this critical source of revenue.
Costco currently charges $60 for a Gold membership and $120 for Executive, which offers a 2% cash rebate on all Costco purchases made that year.
Anyone looking for an answer to the question of "when will Costco raise membership prices?" were probably disappointed after the company's earnings call with analysts.
During the call, Chief Financial Officer Richard Galanti stuck with the familiar "not if, but when" line.
"We like the fact that we're performing well," said Galanti, who is stepping down down from his position later this month. "We like the fact that all -- most all metrics are going in the right direction in our business right now. We've got plenty of runway left."
Galanti insisted the company is "not trying to be cute about it."
"It's not some big analytical formula," he said. "It's simply a measure of, we will, at some point, I'm sure, do it."
Galanti will be stepping down March 15 after 40 years on the job. Costco has named Gary Millerchip, previously Kroger’s CFO, as his successor.
"And I've been joking with Gary. It will be on his watch, not mine," Galanti said.
Analysts expecting fee hike
BMO Capital Markets analyst Kelly Bania picked up on the "not when, but if" theme in her commentary.
“Costco did not make an announcement with respect to the much anticipated membership fee hike, which may be disappointing to some at current share price levels, but a fee increase continues to be a question of when, not if,” Bania said, according to Morningstar.
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D.A. Davidson raised the firm's price target on Costco to $680 from $600 but affirmed a neutral rating on the shares.
The stock outperformed last year and has been an outperformer year to date in 2024 as well, setting a high bar that is likely contributing to the small selloff following the results, the firm said in a research note.
No mention of a membership fee increase may also be seen as a negative "catalyst," though faster "core on core" gross-margin gains and strong e-commerce sales were positives for the quarter, the investment firm said.
“Once again, Costco put its ability to drive traffic on display, delivering solid February and 2Q results; although operating income missed consensus,” Deutsche Bank analyst Krisztina Katai told investors in a research note.
Katai, who raised her price target to $830 from $774 and has a buy rating on the shares, said, “We still see a membership fee increase towards the end of FY24.”
And Baird raised the firm's price target on Costco to $850 from $775 while reiterating an outperform rating on the shares.
With membership Key Performance Indicators trending positively and macro dynamics seemingly settling in, the company's business is in great shape.
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