Costco Wholesale Corp. (COST) announced its fourth quarter and full-year earnings report on Tuesday, September 26. Despite the company delivering both strong revenue and sales growth, Costco’s shares slipped nearly 2% after the release of the report.

For the fourth quarter, the company reported revenue of $78.94 billion, exceeding analysts’ expectations of $77.72 billion. This was up 10% from $72.09 billion in the same quarter last year. Revenue for the full-year reached $242.29 billion, up 7% from $226.95 billion reported last year.

“Results showed good improvement this quarter versus our year-over-year results in Q2 and Q3,” said Costco’s CFO, Richard Galanti. “In the previous two fiscal quarters, big-ticket discretionary, majors, home furnishings, small electrics, jewelry, and hardware, were down 15% and 20% year over year, respectively, and down just 5% year over year in the fourth quarter, with those big-ticket departments making up over half of our e-commerce sales.”

Costco reported net income of $2.16 billion or $4.86 per adjusted share. This is up 15.5% from $1.87 billion or $4.20 per adjusted share in the same quarter last year. For the full-year, net income reached $6.29 billion.

Costco currently operates 861 warehouses worldwide. Costco’s membership fee income reached $1.51 billion for the fourth quarter, up from $1.33 billion one year ago during the same period. Costco’s paid household members reached 71 million and cardholders totaled 127.9 million for the quarter, both up 8% from last year at this time. Paid executive memberships, which includes premium benefits, such as cash back rewards, increased 3% to 32.3 million accounts. Renewal rates in the U.S. and Canada increased to 92.7%, with global rates at 90.4%.

Costco Wholesale Corp. (COST) shares closed at $564.96, relatively unchanged for the week.

United Natural Foods, Inc Posts Earnings

United Natural Foods, Inc. (UNFI) released its fourth quarter and full-year earnings report on Tuesday, September 26. After missing analysts’ sales estimates, the company’s stock fell 22% following the earnings release.

The company reported net sales of $7.42 billion during the quarter. This was up 2% from $7.27 billion in revenue during the same quarter last year. For the full-year, net sales came in at $30.27 billion, up 5% from $28.93 billion in fiscal 2022.

“Our fourth quarter concluded a challenging year in which we continued to emphasize serving customers and suppliers, and we also worked diligently to improve operating effectiveness, efficiency and our technological capabilities,” said United Natural Foods Inc. CEO, Sandy Douglas. “While we grew sales across all of our customer channels, profitability declined primarily due to a decrease in inflation driven procurement gains and elevated shrink. We expect further headwinds as we continue to cycle elevated inflationary benefits during the first half of fiscal 2024.”

United Natural Foods reported a net loss of $68.0 million or $1.15 per adjusted share for the quarter. This is down from a net income of $39.0 million last year at this time. Net income for the year reached $24.0 million, down from $248.0 million in fiscal 2022.

The Providence, Rhode Island-based natural and organic food company saw a 2% rise in its net sales growth primarily driven by inflation, an influx of new customers and larger sales with existing customers but was partially offset by a decrease in total units sold. The company’s interest expense for the fourth quarter increased to $35 million compared to $34 million for the fourth quarter of fiscal 2022 due to higher interest rates, which were partially offset by lower outstanding debt balances. United Natural Foods, Inc. announced the addition of three new board members as a part of its customer and supplier-focused transformation strategy. For fiscal 2024’s outlook, United Natural Foods expects net sales to be in the range of $30.9 billion to $31.5 billion.

United Natural Foods, Inc. (UNFI) shares closed at $14.13, down 24% for the week.

Paychex Quarterly Report

Paychex, Inc., (PAYX) released its first quarter earnings on Wednesday September 27. The payroll service provider reported better-than-expected profit, causing its shares to rise more than 4% following the release of the report.

For the quarter, the company reported total revenue of $1.29 billion. This was up 7% from 1.21 billion in the same quarter last year and was in line with analysts' expectations of $1.28 billion of revenue.

“We are off to a strong start for fiscal 2024 with 7% growth in total revenue and 11% for adjusted diluted earnings per share. Demand for our solutions remains strong as businesses continue to look to us for the technology and expertise to navigate today's rapidly changing business environment,” said Paychex CEO, John Gibson. “In addition, by harnessing the power of Artificial Intelligence and leveraging our vast data sets, we are delivering more actionable insights to our clients, helping them make informed decisions on how to address today’s growing workforce and compliance challenges.”

Paychex posted net income of $419.2 million or $1.16 per adjusted share for the quarter. This was up 10% from net income of $379.2 million or $1.05 per adjusted share this time last year.

The Rochester, New York-based company saw an increase in revenue across all service segments. Service revenue increased $1.3 billion for the quarter, up 5% year-over-year. Management Solutions revenue rose 6% to $955.5 million for the first quarter, which was attributed to growth in client numbers, higher revenue per client and continued demand for human capital management ancillary services. Professional Employer Organization (PEO) and Insurance Solutions revenue increased 5% to $297.8 million in the quarter. The company raised its outlook for fiscal 2024 and expects adjusted earnings per share to increase 9% to 11%.

Paychex, Inc., (PAYX) shares closed at $115.33, up 2% for the week.

The Dow started the week of 9/25 at 33,908 and closed at 33,508 on 9/29. The S&P 500 started the week at 4,311 and closed at 4,288. The NASDAQ started the week at 13,173 and closed at 13,219.

U.S. Treasury Yields increased mid-week, hitting a new 15-year peak as key reports failed to meet economist expectations and ongoing concerns of inflation persist. Yields pulled back from record highs at the end of the week after the Personal Consumption Expenditure showed signs of easing inflation.

On Friday, the Commerce Department announced that the Personal Consumption Expenditure (PCE), which measures the cost of goods and services purchased by U.S. households, rose 0.1% in August, lower than economists’ expectations of 0.2%. Core PCE, which excludes food and energy, saw an annual increase of 3.9%, which was the lowest increase in approximately two years.

"These are very, very good numbers. Even though the drop is not spectacular, it is in the right direction," said, chief investment officer at Bokeh Capital Partners, Kim Forrest. "I am very optimistic that inflation continues to decline and the Fed will note this in their reasoning about interest rates."

The benchmark 10-year Treasury note yield opened the week of September 25 at 4.44% and traded as high as 4.68% on Thursday. The 30-year Treasury bond opened the week at 4.53% and traded as high as 4.81% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment increased by 2,000 to 204,000 for the week ending September 23. While this was an increase from the previous week’s revised level of 202,000, it fell below analysts’ expectations of 214,000. Continuing unemployment claims increased by 12,000 to 1.67 million.

"The job market is in good shape," said chief economist at Comerica, Bill Adams. "The unemployment rate's increase in August is unlikely to be a warning of the economy weakening."

The 10-year Treasury note yield finished the week of 9/25 at 4.58%, while the 30-year Treasury note yield finished the week at 4.70%.

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, September 28. The survey showed 30-year mortgage rates continue to remain well above 7%, reaching their highest point in over two decades.

This week, the 30-year fixed rate mortgage averaged 7.31%, up from last week’s average of 7.19%. Last year at this time, the 30-year fixed rate mortgage averaged 6.70%.

The 15-year fixed rate mortgage averaged 6.72% this week, up from 6.54% last week. During the same week last year, the 15-year fixed rate mortgage averaged 5.96%.

“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” said Freddie Mac’s Chief Economist, Sam Khater. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”

Based on published national averages, the savings rate was 0.45% as of 9/18. The one-year CD averaged 1.76%.

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