The Warehouse Stocks: Costco, PriceSmart and Wal-Mart
Shares of PriceSmart (NASDAQ: PSMT) traded up 2.5 percent Thursday after the company reported gains that beat expectations in the fiscal first quarter. The San Francisco-based company operates warehouse clubs in 12 countries including Costa Rica, Panama, and Trinidad.
On Wednesday, the company reported earnings of $20 million or 66 cents per share versus analysts' forecasts of 62 cents per share.
In the same quarter the prior year, the company earned $14 million or 47 cents per share. Revenue came in at $535.3 million — slightly below the street's $535.4 million consensus. The company also reported a year-over-year increase of 11.6 percent in sales for the month of December.
PriceSmart has seen a gain of 31 percent in the past year and holds a median price target of $81. However, what about domestic warehouse store space? It is not a new concept to American consumers. Has the warehouse trend worn-out? The “big three” in the space are Costco (NYSE: COST), Wal-Mart/Sam's Club (NYSE: WMT), and privately owned BJ's.
Combined, these clubs have more than 122 million members and, although many shoppers now believe they aren't saving much by purchasing in bulk, a Consumers' Checkbook survey found that the average family spending $150 per week on groceries could save around $2,300 a year shopping at warehouse clubs. Clubs are using this statistic in an attempt to lure even more customers.
Is it working? Maybe not. Costco last reported earnings in December beating Wall Street estimates, but revenue generated from membership fees missed expectations. Membership fees rose 14.3 percent to $511 million in the fiscal first quarter ending November 25.
That was down from an 18 percent increase the quarter before even after Costco raised membership fees November 1. Some analysts expected fee revenue to come in at $534 million. Still, Costco had a banner 2012 with shares rising 28 percent indicating that the store is offering shoppers, as well as investors, great value.
Wal-Mart, owner of Sam's Club, reported that comp store sales in Sam's Club stores increased 2.7 percent during the company's last earnings statement including a 1.5 percent increase in comp traffic, and a 12.7 percent increase in operating income.
Wal-Mart is probably not the best way to play the warehouse space since Sam's Club has 620 locations compared to the more than 10,000 Wal-Mart locations. For that reason, Costco is the domestic pure play but for those looking for international exposure, PriceSmart is compelling as well.
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