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Hertz Extends Service to Costco Customers

Zacks Equity Research

Vehicle rental giant, Hertz Global Holdings Inc. (HTZ), has teamed up with warehouse retailer Costco Wholesale Corp. (COST) to provide its 24/7 van rental service to Costco members in the UK.

Following the tie-up, Costco members will have the ease of renting a Long Wheel Base Ford Transit Van from any of the 25 Costco warehouses in the U.K., to drive the goods purchased to their homes without any delay. This self-drive service will be available to Costco customers at a cost-effective price, with hourly rentals starting as low as £13 or US$22 per hour.

Hertz, a pioneer in car rental services, has been keen on expanding its global van rental offering through Hertz 24/7 for more than five years now. While Costco’s members can avail an efficient self-delivery service through this partnership, Hertz is responsible for making the right vehicle available from its fleet and handling all customer transactions. The service provides the convenience of booking online or through smart phones.

Through this partnership, Costco expects to expand its membership base, thus, improving its profits. Moreover, Costco is in an advantageous position with lower expenses as Hertz takes the responsibility of customer transactions.

We believe the deal is a win-win for both companies with the potential for expansion of its scope from the 25 UK locations to the 648 Costco outlets across the globe. We see enormous expansion chances given Hertz’s vast reach of nearly 10,400 locations worldwide.

Shares of Hertz have been rising since the announcement of this partnership and have gained nearly 6.1% in two days.

Hertz currently has a Zacks Rank #3 (Hold), while Costco carries a Zacks Rank #4 (Sell). Better-performing stocks in the business services sector include SouFun Holdings Ltd. (SFUN) and Rentrak Corp. (RENT). Both these stocks have a Zacks Rank #1 (Strong Buy).

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