Costco Wholesale Corporation’s COST sound fundamentals and growth efforts strengthen its position in the ultra-competitive retail landscape. Further, factors such as steady wage gains, solid labor market and improving consumer sentiment have been favoring this operator of membership warehouses. Notably, this Zacks Rank #3 (Hold) stock has soared 44.7% so far in the year, outperforming the S&P 500’s rally of 27.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, shares of this Issaquah, WA-based company recently came under pressure as evident from its decline of 1.4% in a month. The stock got hurt after the company highlighted that with Thanksgiving happening a week later this year compared with the prior year, total and comparable sales were adversely impacted by roughly 0.5% during first-quarter fiscal 2020. Moreover, management highlighted that e-commerce sales were affected by an estimated 12 percentage points.
Nevertheless, industry experts believe that this a short-term blip, and Costco with its better price management and strong membership trends will definitely overcome this. Additionally, the stock’s long-term earnings growth rate of 8.1% and a VGM Score of B reflect its inherent strength. Moreover, the Zacks Consensus Estimate for fiscal 2020 top and bottom line indicates year-over-year improvement of 6.5% and 4.8%, respectively. Notably, the company looks well poised to enter the New Year.
Sound Fundamentals to Support Stock
Costco remains one of the dominant warehouse retailers based on the breadth and quality of merchandise offered. In fact, the company’s strategy of selling products at heavily discounted prices has helped it remain on growth trajectory. Again, a differentiated product range enables the company to provide an upscale shopping experience for members.
Certainly, the company’s decent comparable sales (comps) run has been shaping the stock’s bullish course on the bourses barring the recent hiccup. 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. Meanwhile, net sales improved 6.7% in the month of November, following a rise of 6.8%, 5.6%, 6.9% and 7.9% in October, September, August and July, respectively.
We believe that Costco’s business model and commitment toward opening membership warehouses will continue to drive traffic. The company also remains focused on ramping up investments in the wake of rising competition from the likes of Dollar Tree DLTR, Dollar General DG and Target TGT.
Moreover, with the wave of digital transformation hitting the sector, Costco is rapidly 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, Taiwan and Japan.
Quite apparent, Costco has been able to create a niche for itself in the changing retail landscape.
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Costco Wholesale Corporation (COST) : Free Stock Analysis Report
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