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Costco Sustains Decent Comparable Sales Run in November

Zacks Equity Research

Costco Wholesale Corporation’s COST better price management and strong membership trends have been playing a crucial role in driving robust comparable sales (comps). In fact, the company’s strategy of selling products at heavily discounted prices has helped it remain on growth trajectory. Additionally, a differentiated product range enables the company to provide an upscale shopping experience for members.

Moreover, favorable job scenario, rising wages and improved consumer sentiment are other catalysts. Cumulatively, these factors have helped the company to report decent comps number for the month of November, in spite of operating in a fast-changing retail landscape.

The operator of membership warehouses highlighted that comps for the month of November rose 5.3% following an increase of 5.7% in October, 4.2% in September, 5.5% in August and 5.6% in July. Comps for November reflect an increase of 4.8% in the United States, 5.6% in Canada and 7.5% in Other International locations, respectively.

Excluding the impact of foreign currency fluctuations and changes in gasoline prices, comps for the month rose 4.8%, with 4.3%, 5.8% and 6.8% increase in the United States, Canada and Other International locations, respectively.

Costco Wholesale Corporation Price and Consensus
 

Costco Wholesale Corporation Price and Consensus

Costco Wholesale Corporation price-consensus-chart | Costco Wholesale Corporation Quote

Meanwhile, net sales improved 6.7% to $13.62 billion in the month under review, following a rise of 6.8%, 5.6%, 6.9% and 7.9% in October, September, August and July, respectively.

For the 12-week first-quarter fiscal 2020 ended Nov 24, Costco generated net sales of $36.24 billion, reflecting an increase of 5.6% from $34.31 billion reported in the year-ago period. Comps for the period improved 4.3%, while the same increased 4.7%, 2.9% and 3.2% in the United States, Canada and Other International locations, respectively.

Costco is also steadily expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea and Taiwan. However, e-commerce comps fell 3.6%, following an increase of 16.5% in October. Nonetheless, the metric improved 5.5% during the 12-week first-quarter fiscal 2020 ended Nov 24.

Management highlighted that e-commerce sales during the month of November were adversely impacted by an estimated 20 percentage points. This was because Thanksgiving/Black Friday/Cyber Monday occurred a week later this year compared with the prior year. Again, website performance issues witnessed on Costco’s U.S. and Canadian e-commerce websites on Thanksgiving Day and Black Friday also negatively impacted sales. Total and comparable sales were impacted by roughly one and one-half percent.

Wrapping Up

Costco remains one of the dominant warehouse retailers based on the breadth and quality of merchandise offered. Notably, this Zacks Rank #2 (Buy) stock has surged 44% so far this year, outpacing the industry’s rally of 43%.

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Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
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