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What to Expect from Costco (COST) Earnings as E-Commerce Expands

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Costco (COST - Free Report) shares have climbed 7% in 2019, but still rest roughly 11% below their 52-week high. This gives the discount grocery powerhouse’s stock room to run heading into its quarterly earnings release Thursday. So let’s see what investors should expect from Costco’s financial results as its e-commerce initiatives continue to pay off.  

Recent News & Overview

Costco took over from Amazon (AMZN - Free Report) to claim the number one spot in terms of customer satisfaction in 2018, according to the American Customer Satisfaction Index. The big-box giant scored an 83 in its first year in the internet retail category to top Amazon’s 82 and dethrone the e-commerce power’s place on top, which it had held since 2010.

The survey attributed much of Costco’s e-commerce strength to its delivery options. Costco currently offers free two-day delivery for non-perishable food and household supplies to customers nationwide on orders of $75 or more, with a fee charged to smaller orders. Costco also expanded its same-day delivery service to “most metropolitan” areas through an updated partnership with Instacart.

Most importantly, Costco has been able to thrive in the Amazon age because its customers love their prices and business model. In fact, 90% of Costco members reportedly renew their subscriptions. “Costco wants to be the last to have to raise prices and the first to lower them,” director of retail studies at Columbia Business School Mark Cohen told CNN last year.

Of course, fellow industry giants Kroger (KR - Free Report) , Walmart (WMT - Free Report) , Target (TGT - Free Report) , and others have also all rolled out more e-commerce offerings and delivery options, and expanded their businesses to better adapt to the new retail age. But it seems that Costco has found a winning formula both in stores and online that should help it compete in the market for years to come.

Fiscal Second Quarter Outlook

Costco, like some other retailers, reports its monthly sales throughout the year. The company’s January net sales jumped 8% to $10.71 billion. Meanwhile, the firm’s U.S. comparable sales climbed 6.6%, with e-commerce comps up 22.1% for the month.

Overall, our current Zacks Consensus Estimate calls for Costco’s quarterly revenues to jump 8.05% to reach $35.65 billion, which includes the firm’s membership fees. At the bottom end of the income statement, Costco’s adjusted quarterly earnings are projected to climb 17.61% to hit $1.67 per share.

Investors should also note that the company’s earnings estimate revision activity has been mixed recently. But COST’s quarterly earnings estimate has climbed by $0.03 in the last 30 days.

Bottom Line

Costco stock closed regular trading Friday up marginally at $219.44 a share. This represented a roughly 11% downturn from its 52-week high of $245.16 a share and sets up what could be a solid buying opportunity heading into Costco’s Q2 2019 earnings release that is scheduled for Thursday, March 7.

Make sure to head back to Zacks for a complete breakdown of Costco’s actual quarterly metrics.

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