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Costco (COST) Stellar Comps Aiding Stock's Run on Bourses

Zacks Equity Research

Costco Wholesale Corporation COST has been able to create a niche for itself in the ever-evolving retail landscape on the back of growth strategies, better price management, strong membership trends and increasing penetration of e-commerce business. Moreover, favorable job scenario, rising wages and improved consumer sentiment are other important factors. In fact, these factors collectively have aided the company in sustaining impressive comparable sales (comps) run.

Definitely, Costco’s stellar comps trend is shaping this Zacks Rank #3 (Hold) stock’s bullish run on the bourses. Shares of this Issaquah, WA-based company have surged 35.3% so far in the year, comfortably outpacing the industry’s rally of 25.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s Delve Deep

Notably, comps for the month of July rose 5.6%, following an increase of 5.4% in June, 4.2% in May, 5.4% in April, 5.7% in March, 3.5% in February and 5.2% in January. Meanwhile, net sales improved 7.9% in July, following an increase of 7.5%, 5.9%, 7.3%, 7.4%, 5% and 8% in June, May, April, March, February and January, respectively.

 

Clearly, Costco looks quite disciplined in its approach of tackling prevailing headwinds in the retail landscape — stiff competition from online retailers and aggressive pricing strategy. Moreover, with the wave of digital transformation hitting the sector, it is fast adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores.

It is steadily expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea and Taiwan. E-commerce comparable sales surged 21.3% in the month of July 2019, following an increase of 15.7%, 20.2%, 23.6%, 20.6%, 24.2% and 22.1%, in the months of June, May, April, March, February and January, respectively.

Despite the ultra-competitive retail scenario, the aforementioned numbers look remarkable.

Bottom Line

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 the company to provide an upscale shopping experience for members.

It is also focused on ramping up investments in the wake of rising competition from the likes of Dollar Tree DLTR, Dollar General DG and Target TGT. We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.

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