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Costco (COST) Stock Offers Enough Reasons to Stay Invested
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Costco Wholesale Corporation (COST - Free Report) , an “all-weather” stock, has withstood multiple market gyrations and delivered returns to investors. A resilient business model enables it to gain market share and generate profits. This operator of membership warehouses has exhibited a decent run on the bourses and has outpaced the industry year to date. Shares of this Zacks Rank #3 (Hold) company have appreciated about 20.7% year to date compared with the industry’s rise of 2.2%.
With a long-term earnings growth rate of 8.8% and a VGM Score of B, Costco has ample scope to attain new highs. Additionally, the Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 6.7% and 9.5%, respectively, from the year-ago reported numbers.
Striking the Right Chord With Consumers
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. A customer-centric approach, strategic pricing, merchandise initiatives and an emphasis on memberships have helped Costco post consistent sales growth.
Costco’s net sales increased 5% to $18.42 billion for the retail month of August from $17.55 billion last year. This followed an improvement of 4.5% witnessed in July. Comparable sales for the retail month of August — the four-week period ended Aug 27, 2023 — increased 3.4%. This followed an increase of 2.5% registered in July.
Costco has emerged as a viable option for bargain hunters looking for essentials and other discretionary purchases amid soaring inflation. We believe a growing customer base and high renewal rates should fuel sales.
Image Source: Zacks Investment Research
Steadily Adopting the Omnichannel Mantra
Costco is gradually adopting the omnichannel mantra to provide a seamless shopping experience. Its acquisition of Innovel Solutions, a leading provider of third-party end-to-end logistics solutions — now called Costco Logistics — has boosted its e-commerce capabilities and enabled it to sell "big and bulky" items.
The company has been gradually expanding its e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
Enhancing Footprint
Costco’s expansion strategy looks pretty impressive. The company remains committed to opening new clubs in the domestic and international markets. In our view, Costco’s diversification strategy is a natural hedge against risks that may arise in specific markets.
As of Aug 30, 2023, Costco operates 861 warehouses, including 591 in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
We foresee improvement in membership fees as new warehouse openings ramp up. Membership fees increased 6.1% to $1,044 million in the third quarter of fiscal 2023. Costco ended the quarter with 69.1 million paid household members and 124.7 million cardholders.
Enough Liquidity
Costco’s sturdy balance sheet equips it to deal with cyclical downturns and tap growth opportunities. Solid cash flow generation allows it to raise dividends consistently. The company’s cash & cash equivalents (including short-term investments of $1,215 million) were $13,708 million at the end of the third quarter of fiscal 2023.
Costco has always been a favorite pick for investors who are seeking both steady income and growth. This Issaquah, WA-based company, with a strong history of dividend payments as well as sound fundamentals, provides a hedge against any odd swings in the stock market.
Grocery Outlet, an extreme value retailer of quality, name-brand consumables and fresh products, currently has a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 12.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 4.9%, respectively, from the year-ago reported numbers. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Ross Stores, which operates off-price retail apparel and home fashion stores, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 11.6%.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7% and 19.4%, respectively, from the year-ago reported numbers. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 6.6%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings implies growth of 5% and 2.1%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.
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Costco (COST) Stock Offers Enough Reasons to Stay Invested
Costco Wholesale Corporation (COST - Free Report) , an “all-weather” stock, has withstood multiple market gyrations and delivered returns to investors. A resilient business model enables it to gain market share and generate profits. This operator of membership warehouses has exhibited a decent run on the bourses and has outpaced the industry year to date. Shares of this Zacks Rank #3 (Hold) company have appreciated about 20.7% year to date compared with the industry’s rise of 2.2%.
With a long-term earnings growth rate of 8.8% and a VGM Score of B, Costco has ample scope to attain new highs. Additionally, the Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 6.7% and 9.5%, respectively, from the year-ago reported numbers.
Striking the Right Chord With Consumers
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. A customer-centric approach, strategic pricing, merchandise initiatives and an emphasis on memberships have helped Costco post consistent sales growth.
Costco’s net sales increased 5% to $18.42 billion for the retail month of August from $17.55 billion last year. This followed an improvement of 4.5% witnessed in July. Comparable sales for the retail month of August — the four-week period ended Aug 27, 2023 — increased 3.4%. This followed an increase of 2.5% registered in July.
Costco has emerged as a viable option for bargain hunters looking for essentials and other discretionary purchases amid soaring inflation. We believe a growing customer base and high renewal rates should fuel sales.
Image Source: Zacks Investment Research
Steadily Adopting the Omnichannel Mantra
Costco is gradually adopting the omnichannel mantra to provide a seamless shopping experience. Its acquisition of Innovel Solutions, a leading provider of third-party end-to-end logistics solutions — now called Costco Logistics — has boosted its e-commerce capabilities and enabled it to sell "big and bulky" items.
The company has been gradually expanding its e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
Enhancing Footprint
Costco’s expansion strategy looks pretty impressive. The company remains committed to opening new clubs in the domestic and international markets. In our view, Costco’s diversification strategy is a natural hedge against risks that may arise in specific markets.
As of Aug 30, 2023, Costco operates 861 warehouses, including 591 in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden.
We foresee improvement in membership fees as new warehouse openings ramp up. Membership fees increased 6.1% to $1,044 million in the third quarter of fiscal 2023. Costco ended the quarter with 69.1 million paid household members and 124.7 million cardholders.
Enough Liquidity
Costco’s sturdy balance sheet equips it to deal with cyclical downturns and tap growth opportunities. Solid cash flow generation allows it to raise dividends consistently. The company’s cash & cash equivalents (including short-term investments of $1,215 million) were $13,708 million at the end of the third quarter of fiscal 2023.
Costco has always been a favorite pick for investors who are seeking both steady income and growth. This Issaquah, WA-based company, with a strong history of dividend payments as well as sound fundamentals, provides a hedge against any odd swings in the stock market.
3 Stocks Looking Red Hot
Here we have highlighted three better-ranked stocks, namely Grocery Outlet (GO - Free Report) , Ross Stores (ROST - Free Report) and Walmart (WMT - Free Report) .
Grocery Outlet, an extreme value retailer of quality, name-brand consumables and fresh products, currently has a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 12.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 4.9%, respectively, from the year-ago reported numbers. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Ross Stores, which operates off-price retail apparel and home fashion stores, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 11.6%.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7% and 19.4%, respectively, from the year-ago reported numbers. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 6.6%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings implies growth of 5% and 2.1%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.