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Costco (COST) Poised to Tap Rising Demand Amid COVID-19

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Costco Wholesale Corporation (COST - Free Report) has emerged as one of the preferred shopping destinations for consumers amid the ongoing crisis be it for essentials or other discretionary purchases. This Issaquah, WA-based company has been adopting strategies and making planned investments to cater to consumer demand and behavior in the new normal. The company’s strategy to sell products at discounted prices has helped it expand customer base. Also, the company’s differentiated product range resonates well with customers’ spending habits.

Better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to the company’s upbeat performance. Notably, the company registered an increase of 16.9% in net sales to $42.35 billion during 12-week first quarter ended Nov 22, 2020. We note that e-commerce comparable sales advanced 86.4% year over year during the 12-week first quarter ended Nov 22, 2020.

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. The company operates e-commerce sites in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

To drive 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 facilitates sales of "big and bulky" items.

Bottom Line

Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. It is also focused on ramping up investments in the wake of rising competition from the likes of Dollar Tree (DLTR - Free Report) , Walmart (WMT - Free Report) and Target (TGT - Free Report) . We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.

Impressively, the Zacks Consensus Estimate for the second quarter and fiscal 2021 has moved up by 1.3% and 2.4% to $2.37 and $9.93 per share, respectively, in the past seven days.

Again, shares of this Zacks Rank #3 (Hold) company have gained 26.5% so far this year compared with the industry’s rally of 20.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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