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Costco's Stellar Comps Performance Likely to Propel Stock

Zacks Equity Research

In the changing retail landscape, Costco Wholesale Corporation COST has been able to create a niche for itself 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.

Notably, comps for the month of March rose 5.7% following an increase of 3.5% in February and 5.2% in January. Comps for March reflect an increase of 6.9% in the United States, 3.8% in Canada and 1.6% in Other International locations, respectively. Meanwhile, net sales improved 7.4% to $13.87 billion in the month of March, following an increase of 5% and 8% in February and January, respectively.

Meanwhile, shares of this warehouse retailer has surged 15.9% in the past three months compared with the industry’s growth of 13.2%. Currently, this Zacks Rank #2 (Buy) stock is trading close to its 52-week high of $247.25, and there are valid reasons to believe that Costco with long-term earnings growth rate of 9% could scale new highs. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 



Costco is committed toward ramping up investments in the wake of rising competition from the likes of Dollar Tree DLTR, Dollar General DG and Ross Stores ROST. We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.

With the wave of digital transformation hitting the sector, Costco 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 20.6% in the month of March 2019, following an increase of 24.2% and 22.1%, in the months of February and January, respectively.

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 its members. Notably, membership fees have increased 9.5% and 7.3%, in the first and second quarter of fiscal 2019, respectively.

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Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
Dollar General Corporation (DG) : Free Stock Analysis Report
 
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