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Costco (COST) Regains Sales Momentum in May After Recent Blip

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After a dip in the month of April, Costco Wholesale Corporation’s (COST - Free Report) net sales shot up in the month of May. Notably, the company’s growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business supported the performance. Cumulatively, these factors helped this operator of membership warehouses in registering impressive comparable sales run.

We note that net sales increased 7.5% to $12.55 billion during the four-week period ended May 31, 2020 from $11.67 billion in the year-ago period. This followed a decline of 1.8% during the month of April as stay-at-home orders, social distancing and some mandatory closures resulted in lower traffic and soft sales at warehouses. Sales in the month of March had risen 11.7%.

Costco’s comparable sales for the month of May rose 5.4%. This followed a decline of 4.7% in April but an increase of 9.6% in March. The monthly comparable sales reflected an increase of 5.5% and 12% in the United States and Other International locations, respectively, partly offset by 0.9% decline in Canada.

Excluding the impacts from change in gasoline prices and foreign exchange, comparable sales for the month under discussion rose 9.7% with 9.2%, 4.9% and 17.9% increase in the United States, Canada and Other International locations, respectively.
This Issaquah, WA-based company’s e-commerce sales have been showcasing a sharp increase, courtesy of loyal customer base who have been shopping for essentials from home amid the lockdown. E-commerce comparable sales soared 106.2% during the month of May. This follows an increase of 85.7% and 48.3% in the months of April and March, respectively.

With the prevailing trend of digital transformation in the sector, retailers are rapidly adopting the omni-channel mantra to provide a seamless shopping experience online and in stores. Costco, which shares space with Walmart (WMT - Free Report) , Amazon (AMZN - Free Report) and Target (TGT - Free Report) , is also following the trend. Costco operates e-commerce sites in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

To drive its online sales, the company launched CostcoGrocery to deliver non-perishable items to buyers’ homes, and expanded the same-day grocery delivery service in collaboration with Instacart. Recently, it acquired Innovel Solutions, a leading provider of third-party end-to-end logistics solutions. The buyout will boost Costco’s e-commerce capabilities and facilitate sales of "big and bulky" items.



To Conclude

Costco continues to be one of the dominant warehouse retailers based on the breadth and quality of merchandise offered. In fact, its strategy of selling products at heavily discounted prices has helped it to remain on growth track. Additionally, a differentiated product range enables it to provide an upscale shopping experience for members.

Notably, shares of this Zacks Rank #3 (Hold) company have rallied approximately 23.7% in a year compared with the industry’s growth of 22%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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