Costco beats profit estimates as margin pressures ease, shares rise

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Customers push shopping carts while entering a Costco Wholesale store in Miami, Florida.

But Chief Financial Officer Richard Galanti played down expectations of easing competition in the grocery space.

“I believe there is little less pricing pressure… But don’t get me wrong. As soon as we have a good quarter, the next quarter will change that.”

Costco said it will raise its starting wages to $15 and $15.50 per hour, from $14 and $14.50 per hour in the United States and Canada amid a tight labor market.

The increases, along with higher wages for supervisors, will add 3 to 4 basis points to selling, general & administrative expenses over the next four quarters, the company said.

In the second quarter, the company’s gross profit margin increased 31 basis points to 11.29 percent. Profit margins had fallen in the prior three quarters, according to Refinitiv data.

Margins for Costco, which operates gas stations at its warehouses, was also fueled by lower gas prices.

Net income attributable to the company rose to $889 million, or $2.01 per share, from $701 million, or $1.59 per share, a year earlier. Analysts on average had expected a profit of $1.69 per share, according to IBES data from Refinitiv.