Sterne Agee CRT Defends Costco, Sees 'Healthy' Biz And Value Here

In a report published Thursday, Sterne Agee CRT analyst Charles Grom maintained a Buy rating on Costco Wholesale Corporation COST, with a price target of $154.

For the 5-week period ending July 5, Costco’s sales grew 1.2 percent y/y to $11.01 billion. Reported SSS for the entire company declined 1 percent during the period. “June results included a combined ~670 bps drag from FX translation and gas deflation…cannibalization from new store openings had a 20 bps impact, the lowest reading in 2+ years,” analyst Charles Grom said.

Although the comp results were negative, “the underlying business remains rock-solid,” Grom pointed out. In the report Sterne Agee CRT noted that, excluding the currency and gas headwinds, the “signs of strength” during the June report included:

• A core comp of more than 5.5 percent
• Solid traffic trends, marginally short of 4 percent
• A “nice bounce-back” in the consumer electronics business
• “Broad-based strength in softlines, a category that continues to show momentum.”

Costco’s strong fundamentals and the stock's sell-off over the past few months create “a good entry point for long-term investors,” Grom added.