Costco beats quarterly revenue estimates on strong grocery demand

(Reuters) -Costco Wholesale beat third-quarter revenue expectations on Thursday, as cash-strapped consumers flocked to its warehouses to grab low-priced groceries and discretionary items.

The membership-only retailer saw resilient demand for its groceries and bakery items as consumers grappling with still-high cost of living preferred cooking more meals at home.

With consumers trading down to shop for low-priced goods across product categories, the company also saw steady demand for its low-priced discretionary items.

Earlier this month, retail bellwether Walmart (NYSE:) beat quarterly estimates and forecast positive annual targets, supported by steady demand for cheaper groceries and expectations of a rebound in demand for non-essentials.

Another larger peer Target, however, reported a dour quarter on tepid consumer spending.

Costco total revenue of $58.52 billion for the quarter ended May 12, compared with analysts’ average estimate of $58.07 billion, according to LSEG data.

The company also posted a profit of $3.78 per share, above estimates of $3.70.

“Consumers have become increasingly value-driven in the past two years and it seems like that trend won’t be waning anytime soon. If that’s the case, Costco should benefit for years to come,” said Blake Droesch, analyst at eMarketer.

In the first quarter, visits to Costco Wholesale (NASDAQ:) were up 8.9% on a year-over-year basis, while visits to Walmart and Target were up 3.9% and 3.5% respectively, as per Placer.ai data.

The company’s total comparable sales rose 6.5% on an adjusted basis in the quarter, compared to a 3.5% rise last year.

Costco’s ecommerce comparable sales rose 20.7% in the current quarter after dropping 10% last year.