How Costco is 'moving into the future,' despite a mixed Q2

Shares of Costco (COST) are under pressure after the company released its second quarter report with mixed results. The company beat expectations on the bottom line but missed on the top line, sharing adjusted earnings per share (EPS) of $3.92 –– surpassing estimates of $3.62. The retailer also improved its same-store sales by 5.8%, excluding gas and foreign exchange.

Yahoo Finance Retail Reporter Brooke DiPalma joins the Live show to break down the report and discuss how the company is "moving into the future," from e-commerce to Apple Pay.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

SEANA SMITH: Costco, one of the top trending tickers on "Yahoo Finance." this morning. The stock under pressure in the pre-market action. Sales, gross margins missing the Street's expectations.

"Yahoo Finance's" Brooke DiPalma here with the details. Brooke, it looks like it's a bit of a disappointing quarter here, at least, in the Streets view.

BROOKE DIPALMA: Yeah. Many experts saying that valuation seems a bit too stretch here. Joe Feldman of Telsey Group telling "Yahoo Finance" this morning, Costco's stock has been on fire lately. So it only makes sense that it'll take a bit of a pause here. And this typically does happen after Costco reports financial news.

They said they're not concerned, given the business's quite solid results here. At adjusted earnings per share coming in higher than the Street expected. Revenue growing 5.75% to $58.44 billion last quarter. That's slightly lower than expectations, as we noted at the top.

But same-store sales jumping 5.8% year-over-year in the US, in particular. Same-store sales did see growth. They came in higher than the Street expected at 4.8%. Foot traffic here in the US, also, up year-over-year, 4.3%.

And then if you take a closer look at those digital sales numbers, we did see them grow 18% year-over-year. And that's really a hot commodity on the Street. Many discussing this as Costco really makes way into the next generation for consumers. They did see on the e-commerce platform the demand for gold, for silver, and appliances were very, very strong.

They also noted that gift cards and e-tickets also saw a rise in interest last quarter. He noted that Costco logistics enjoyed record breaking deliveries, and that they are making improvements on their app. And they did roll out Apple Pay last week.

So Costco certainly looking to move into the future here. I always take a closer look at those membership fees, the key revenue stream for the wholesale giant. They came in at $1.11 billion. That is a jump from the previous quarter that we saw.

And renewal rate, a key metric that the company also takes a look at in the US and Canada, we saw that rate come in at 92.9%. And the CFO Richard Galanti saying on the call, that all metrics are going in the right direction for them, potentially, to increase membership hikes.

He said, it's a measure of we will at some point. I'm sure do it, but not yet. Costco also making a big push internationally. They did open their sixth store in China last quarter.

And a fun fact here, in the food courts, guys, they switched the churro for a chocolate chip cookie, 5.5 ounces. And they're also playing around with a sushi store. They opened up their first one in Washington.

SEANA SMITH: What do you think?

BRAD SMITH: I'm going to revolt. I want the churro. Keep the churro.

BROOKE DIPALMA: I love a good chocolate chip cookie.

SEANA SMITH: I was going to say it.

BRAD SMITH: There's enough places that got chocolate chip cookies. You could go to Insomnia. You can go to all these other places.

[INTERPOSING VOICES]

Yeah. Just don't touch that pesto butter salmon. You have spot on. Brooke, thanks so much. I really just want to see the visual of that gold bar again. The Costco gold bar, [? viral ?] [INAUDIBLE]. Ask and you shall receive here on "Yahoo Finance."

Thank you so much to our control room for that. Satisfying my wishes.