Costco Wholesale (COST) reported mixed fiscal first-quarter results after the closing bell Thursday, amid weaker consumer demand. But the Club continues to see the fundamentals of the business as solid and are encouraged by the bulk retailer’s expected membership fee hike and special dividend. Total revenue , which includes revenues from membership fees, increased 8% year-over-year, to $54.44 billion, slightly below the consensus estimate by analysts of $54.64 billion, according to Refinitiv. E-commerce comparable sales fell 3.7% year-on-year, or 2% on an adjusted basis. For the total company, comparable sales increased 6.6% year-on-year, or 7.2% on an adjusted basis. Earnings-per-share grew 3% year-over-year, to $3.07 a share, missing analysts’ forecasts of $3.11 a share. The results were weighed down in part by one-off items. And with about 25% to 30% of Costco’s earnings generated outside the United States, the strong U.S. dollar was also a drag on earnings. Bottom line Costco’s numbers were slightly below expectations, but the Club holding isn’t being penalized at the moment, with shares down just 0.27% in afterhours trading Thursday evening. Still, the stock has weathered a challenging December so far, down nearly 11% on weaker-than-expected comparable monthly sales for November — news that likely prepared the market for today’s earnings miss. More importantly, the long-term direction of the business remains strong with positive catalyst events on the horizon, including a likely membership-fee increase and special dividend. And we are encouraged by apparent record e-commerce sales for Black Friday and Cyber Monday, according to management. Those days were not included in Costco’s fiscal first quarter, which ended on Nov. 20. Nonetheless, we locked in some gains at a higher price late last week, given short-term concerns that the slowdown in November sales could indicate a larger trend. Membership stats Revenue from membership fees is a closely followed metric from which Costco earns the majority of its profits. Revenue from membership fees increased 5.7% year-over-year, to $1 billion, slightly missing estimates of $1.01 billion. Foreign exchange had a $32 million negative impact. Costco ended its quarter with 66.9 million paying household members and 120.9 million cardholders. Both are up 7% year-over-year. Renewal rates in the U.S. and Canada were 92.5%, compared to 92.4% a quarter ago. The worldwide renewal rate was 90.4%, in line with the previous quarter. Margins Reported gross margins fell 45 basis points year-over-year, and 21 basis points excluding gas inflation. Core merchandise margins fell 52 basis points on a reported basis, and 31 basis points excluding gas inflation. The core-on-core gross margin was down 31 basis points, with food and sundries up slightly, offset by a decline in nonfood- and fresh food margins. Ancillary and other businesses’ margins increased 23 basis points on a reported basis, and 30 basis points…
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