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Costco (COST) Q1 Earnings to Benefit From E-commerce Strength

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Costco Wholesale Corporation’s (COST - Free Report) first-quarter fiscal 2021 results, slated to release on Dec 10, are likely to reflect strength in e-commerce sales. Consumers’ increased shift to online purchasing owing to the coronavirus outbreak seems to have worked in favor of Costco. The company’s e-commerce sales have been showcasing a sharp increase, courtesy of growing stay-at-home trends.

A Look at E-commerce Sales

Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether offline or online. We note that e-commerce comparable sales soared 71.3% during the month of November. This followed an increase of 91.1%, 90.3% and 101.9%, in the months of October, September and August, respectively. Costco operates e-commerce sites in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia.

To drive its online sales, the company launched CostcoGrocery to deliver non-perishable items to buyers’ homes. Its partnership with Instacart facilitates same-day delivery of groceries to shoppers. The company acquired Innovel Solutions, a leading provider of third-party end-to-end logistics solutions. The buyout bolsters Costco’s e-commerce capabilities and facilitate sales of "big and bulky" items.

The role of such initiatives becomes more important in situations like these, wherein social distancing has led to increased online shopping. Certainly, the company has been ramping up investments in the wake of rising competition from the likes of Dollar Tree (DLTR - Free Report) , Dollar General (DG - Free Report) and Target (TGT - Free Report) .

Notably, Costco in its November sales release highlighted that during the 12-week first quarter ended Nov 22, e-commerce comparable sales soared 86.4%.

How Are Estimates Shaping Up?

The Zacks Consensus Estimate for Costco’s first-quarter revenues is pegged at $43.16 billion, indicating an improvement of 16.5% from the prior-year quarter’s reported figure. The consensus mark for earnings has increased 2% over the past seven days to $2.04. The figure suggests growth of roughly 18% from the year-ago period.

Costco has an Earnings ESP of +0.46% and a Zacks Rank #3 (Hold).

The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

An Overall Picture

Costco’s growth strategies, better price management and decent membership trends have been contributing to its upbeat performance. In fact, the company’s strategy to sell products at discounted prices has helped it expand customer base. Under the current circumstances, people are exhibiting a preference for discount stores for essentials or other daily purchases. Apparently, Costco has emerged as viable option for them.

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