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Costco's Solid Comps Trend Exhibits Sound Fundamentals

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Costco Wholesale Corporation (COST - Free Report) continued with solid comparable-store sales (comps) trend amid a tough retail landscape. Major chains are grappling with sluggish store and mall traffic as consumers switch to online shopping. But Costco seems somewhat resilient to the challenging retail backdrop. We believe that the hike in annual membership fees and increased penetration of Citi Visa co-brand card program will benefit the stock in the near term.

Despite Costco’s sound fundamentals, we note that shares of this Zacks Rank #3 (Hold) stock have dropped 13.1% in the past three months compared with the industry’s decline of roughly 6.7%. So, what suddenly went wrong with the stock? You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, shares of Costco were hit hard, after the news of Whole Foods Market buyout by Amazon.com Inc. (AMZN - Free Report) surfaced.

Costco Continue to Post Solid Comps

Comps for four-week ended Aug 27, 2017 increased 7.3%, following an increase of 6.2% in July, 6% in June, 4.1% in May, 3% in April, 6% in March, 4% in February and 7% in January. The company generated net sales of $9.8 billion in August, up 10% year over year. Notably, net sales increased 8.8%, 7%, 7%, 5%, 9%, 8% and 9% in July, June, May, April, March, February and January, respectively. Comparable e-Commerce sales for the month of August surged 26%.

Comps for July reflect an increase of 7.4%, 8.2% and 6% at the U.S., Canada and Other International locations, respectively. Excluding the impact of foreign currency fluctuations and gasoline prices, Costco’s comps for the month under review rose 5.9%. The company recorded comps increase of 6.1%, 4.3% and 6.7% at the U.S., Canada and Other International locations.

For the 52-week period, Costco reported 4.1% jump in comps, displaying an increase of 4.3%, 4.6% and 2% at the U.S., Canada and Other International locations. Net sales for the period came in at $123.5 billion, an increase of 6.4% from the year-ago period.

Costco, operates 741 warehouses, comprising 514 warehouses in the United States and Puerto Rico, 97 in Canada, 37 in Mexico, 28 in UK, 26 in Japan, 13 in Korea, 13 in Taiwan, nine in Australia, two in Spain, one in Iceland and one in France.

Apart from Costco, L Brands, Inc. (LB - Free Report) and The Buckle, Inc. (BKE - Free Report) came out with comparable sales results for the month of August. Comps for L Brands and Buckle declined 4% and 7.9%, respectively.

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