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Here's Why Costco (COST) is Marching Ahead of the Industry
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The tag “all-weather stock” suits Costco Wholesale Corporation (COST - Free Report) as the company has weathered multiple market gyrations and still delivered returns to investors. This operator of membership warehouses has exhibited a decent run on the bourses in the past six months. Thanks to its operational initiatives — focus on expanding customer reach, cost optimization and strategic investments — the stock has outpaced both the industry and the Retail-Wholesale sector. In the said period, shares of Costco have advanced about 24.7% compared with the industry’s growth of 8%. Meanwhile, the sector declined 7.6%.
Building Strong Presence
Costco has emerged as a viable option for bargain hunters looking for essentials and other discretionary purchases. The company stands to benefit from its ability to draw traffic through strategic pricing along with robust membership model and increasing penetration of e-commerce business. Cumulatively, these factors have been aiding the company in registering impressive sales numbers.
This Issaquah, WA-based company put up a decent performance in fourth-quarter fiscal 2021. Costco’s net sales increased 17.5% to $61.44 billion during the fourth quarter of fiscal 2021 — the 16-week period ended Aug 29, 2021 — from $52.28 billion in the last year. Markedly, comparable sales climbed 15.5%, reflecting an improvement of 14.9%, 19.5% and 15% in the United States, Canada and Other International locations, respectively.
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Undoubtedly, Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or at stores. The company has been gradually expanding its e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia. E-commerce comparable sales advanced 11.2% year over year during the fourth quarter.
To drive its online sales, the company in collaboration with Uber Technologies had earlier launched a grocery delivery pilot in 25 locations across Texas. This allows members to get their on-demand grocery delivery within hours with Uber and Uber Eats mobile apps. Again, Costco Logistics has boosted e-commerce capabilities and facilitated selling of "big and bulky" items. We note that Costco Logistics sales represented 24% of e-commerce sales in the final quarter of fiscal 2021.
Bottom Line
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. It is focused on 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) . We believe that the company’s business model as well as commitment toward opening membership warehouses, and providing convenient and affordable ways to shop will continue to drive traffic, and in turn revenues.
The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s current financial year sales and earnings suggests growth of 7.9% and 7%, respectively, from the year-ago period. Additionally, the consensus estimates for the current and next financial year earnings per share have increased about 3% and 3.3% to $11.86 and $13.02, respectively, over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Here's Why Costco (COST) is Marching Ahead of the Industry
The tag “all-weather stock” suits Costco Wholesale Corporation (COST - Free Report) as the company has weathered multiple market gyrations and still delivered returns to investors. This operator of membership warehouses has exhibited a decent run on the bourses in the past six months. Thanks to its operational initiatives — focus on expanding customer reach, cost optimization and strategic investments — the stock has outpaced both the industry and the Retail-Wholesale sector. In the said period, shares of Costco have advanced about 24.7% compared with the industry’s growth of 8%. Meanwhile, the sector declined 7.6%.
Building Strong Presence
Costco has emerged as a viable option for bargain hunters looking for essentials and other discretionary purchases. The company stands to benefit from its ability to draw traffic through strategic pricing along with robust membership model and increasing penetration of e-commerce business. Cumulatively, these factors have been aiding the company in registering impressive sales numbers.
This Issaquah, WA-based company put up a decent performance in fourth-quarter fiscal 2021. Costco’s net sales increased 17.5% to $61.44 billion during the fourth quarter of fiscal 2021 — the 16-week period ended Aug 29, 2021 — from $52.28 billion in the last year. Markedly, comparable sales climbed 15.5%, reflecting an improvement of 14.9%, 19.5% and 15% in the United States, Canada and Other International locations, respectively.
Undoubtedly, Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or at stores. The company has been gradually expanding its e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan, and Australia. E-commerce comparable sales advanced 11.2% year over year during the fourth quarter.
To drive its online sales, the company in collaboration with Uber Technologies had earlier launched a grocery delivery pilot in 25 locations across Texas. This allows members to get their on-demand grocery delivery within hours with Uber and Uber Eats mobile apps. Again, Costco Logistics has boosted e-commerce capabilities and facilitated selling of "big and bulky" items. We note that Costco Logistics sales represented 24% of e-commerce sales in the final quarter of fiscal 2021.
Bottom Line
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. It is focused on 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) . We believe that the company’s business model as well as commitment toward opening membership warehouses, and providing convenient and affordable ways to shop will continue to drive traffic, and in turn revenues.
The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s current financial year sales and earnings suggests growth of 7.9% and 7%, respectively, from the year-ago period. Additionally, the consensus estimates for the current and next financial year earnings per share have increased about 3% and 3.3% to $11.86 and $13.02, respectively, over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.