The U.S. economy is still grappling with an uneven recovery, and companies are tussling to survive the downturn. Amid this environment, Costco Wholesale Corp (COST) has nearly succeeded in overcoming the hurdles, keeping an upbeat note and sustaining its sales momentum.
Costco continues to be a dominant retail wholesaler, based on the breadth and quality of merchandise it offers. The company’s strategy to sell products at heavily discounted prices has helped it to remain on a positive growth track amid the beleaguered economic conditions, as cash-strapped customers continue to see it as a viable option for low-cost necessities.
Riding on Positive Comps
Costco is well positioned in the warehouse club industry, having delivered positive comparable-store sales consistently so far in 2013.
Costco has consistently registered comparable-store sales growth from January to May. Within this period, comps growth touched a low of 4% and hit a high of 6%, thereby recording an average growth of approximately 4.6%. In the first five months of 2013, comps increased 4% in January, March and April, 6% in February and 5% in May.
Given the current macroeconomic environment, monthly sales data for Costco is also encouraging, reflecting consistent growth. The company, within the span of January to May 2013, registered sales growth in the range of 7%–8%, reflecting average growth of approximately 7.2%. The company registered sales growth of 7% in January, March, April and May, while registering 8% growth in February.
What Drives Growth
A differentiated product range enables Costco to provide an upscale shopping experience to its members, resulting in market share gains and higher sales per square foot. Moreover, the company continues to maintain a healthy membership renewal rate. Costco also remains committed to open new clubs in domestic and international markets. The company’s diversification strategy is a natural hedge against risks that may arise in specific markets.
Costco’s Zacks Rank
Costco currently carries a Zacks Rank #3 (Hold). Other stocks worth considering in the retail sector include Conn’s, Inc. (CONN) and Bon-Ton Stores Inc. (BONT), both of which hold a Zacks Rank #1 (Strong Buy), and J&J Snack Foods Corp. (JJSF), which carries a Zacks Rank #2 (Buy). These stocks are expected to continue with their upbeat performances.
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