Back to top

Costco's (COST) Comparable Sales Run Looks Compelling

Read MoreHide Full Article

Underlying economic strength backed by robust job market, rising disposable income and upsurge in consumer confidence are acting as catalysts to the Zacks Retail-Wholesale sector. Costco Wholesale Corporation (COST - Free Report) being part of the space has successfully created a niche for itself based on these factors. No wonder, these along with better price management, strong membership trends and increasing penetration of e-commerce business have aided it in sustaining impressive comparable sales (comps) run.

Stellar Comps Run

In October, comps rose 8.6% following an advance of 8.4% in September, 9.2% in August and 8.3% in July.

Comps for October reflect an increase of 10.4%, 2.4% and 5.5% at the United States, Canada and Other International locations, respectively. Excluding the impact of foreign currency fluctuations and gasoline prices, comps for the month rose 6.6%, while the same increased 7.1%, 4.2% and 6.6% at the United States, Canada and Other International locations, respectively.

Meanwhile, net sales have improved 10.6%, 10.3%, 12.2%, and 10.1% in the months of October, September, August and July, respectively.



E-commerce Business Doing Well

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) , Target (TGT - Free Report) and Ross Stores (ROST - Free Report) , is no exception to this trend.

It is also steadily expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea and Taiwan. E-commerce comparable sales advanced 20%, 28.6%, 23.8% and 20.9% in the months of October, September, August and July, respectively.

Bottom Line

Costco continues to be one of the dominant warehouse retailers based on the breadth and quality of merchandise offered. In fact, the strategy to sell products at heavily discounted prices has helped it to remain on growth track. So far in the year, the shares of this Zacks Rank #3 (Hold) company have surged 17.9% outperforming the industry’s growth of 10.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Certainly, Costco seems somewhat unfazed by tough retail scenario, comprising soft store traffic and inclination toward online shopping. However, analysts pointed that any incremental investments or aggressive pricing strategy may hurt margins. Further, we note that SG&A expenses and merchandise costs have been increasing for quite some time now.

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

Published in