Back to top

Strategic Endeavors, Stellar Comps to Aid Costco's Top Line

Read MoreHide Full Article

A glimpse of Costco Wholesale Corporation (COST - Free Report) share price movement reveals that it has increased roughly 13.1% in the past six months comfortably outperforming the industry’s growth of 10.7% and S&P 500’s advance of approximately 3%. Further, the stock is hovering close to its 52-week high of $211.77. There is no reason why this Zacks Rank #3 (Hold) stock cannot breach that mark in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Strategic Endeavors

Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of merchandise offered. In fact, the company’s strategy to sell products at heavily discounted prices has helped it to remain on growth track. Certainly, a favorable economic backdrop — strong labor market, rising disposable income and elevated consumer sentiment — are also working in tandem for the company.

It is also gradually expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea and Taiwan. To drive its online sales further, the company launched new delivery services for its customers, one CostcoGrocery option to deliver non-perishable items to buyer’s home within two days of ordering and another same day grocery delivery service in collaboration with Instacart.

Additionally, a differentiated product range enables Costco to provide an upscale shopping experience for its members, consequently resulting in market share gains and higher sales per square foot. Notably, membership fees have increased 14.4%, 12.6% and 9.8% in the third, second and first quarter of fiscal 2018.

Costco Wholesale Corporation Price, Consensus and EPS Surprise


Costco Wholesale Corporation Price, Consensus and EPS Surprise | Costco Wholesale Corporation Quote

Sturdy Comps Run

Costco seems somewhat unfazed by tough retail scenario, comprising soft traffic and inclination toward online shopping. This Issaquah, WA-based company continued with positive comps performance driven by improved store traffic and average transaction size.

Comparable sales (comps) increased 11.7% in May, following an advance of 10.9% in April, 8.6% in March, 10.5% in February and 6% in January. Notably, net sales have jumped 13.1%, 10.9%, 12.8% and 8.4% in the months of April, March, February and January, respectively.

We note that comparable e-commerce sales have surged 34.4%, 43.1% and 33.2% in May, April and March, respectively.

With the wave of digital transformation hitting the sector, retailers are fast adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores. Costco, which shares space with Walmart (WMT - Free Report) , Amazon (AMZN - Free Report) and Target (TGT - Free Report) , is no exception to this trend.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

More from Zacks Analyst Blog

You May Like