Costco Up As Comps Surpass Expectations - Analyst Blog

Shares of Costco Wholesale Corporation COST rose roughly 1.7% following comparable-store sales results for May, the four weeks ended Jun 1, 2014, that bettered analysts' expectations. The warehouse retailer delivered comparable-store sales growth of 6%, portraying an increase of 6% in the U.S. and 4% at international locations.

Excluding the effect of inflation in gasoline prices and impact of foreign currency fluctuations, Costco's comparable-store sales for May rose 6%, reflecting comparable sales growth of 6% at its U.S. locations and 7% at international outlets.

Most of the retailers benefited during the month under review, as favorable weather conditions, aggressive promotional strategies and improving job prospects were enough to lure consumers. Retailers struggled with dampened sales in the first three months of the year as the harsh weather locked consumers indoor. Sales showed improvement in April and the uptrend continued in May too. Retailers such as L Brands, Inc. LB, The Gap, Inc. GPS and Zumiez, Inc. ZUMZ saw their comparable-store sales increasing 3%, 1% and 3.6%, respectively during May.

Coming to Costco, comparable-store sales for the 39-week period, increased 4%, buoyed by 4% growth at the U.S. and 2% increase at international locations. Excluding the effect of gasoline prices and foreign currency fluctuations, Costco's comparable-store sales for the period jumped 6%. Comps increased 5% at the U.S. and 7% at international locations.

Total net sales for May rose 8% to $8.78 billion from $8.13 billion in the year-ago period. Costco's net sales for the 39-week period increased 6% to $81.99 billion from $77.13 billion in the year-ago period.

The company currently operates 657 warehouses, comprising 464 in the United States and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, 6 in Australia and 1 in Spain. Further, the company plans to open 6 more warehouses before the end of fiscal 2014.

Currently, Costco carries a Zacks Rank #3 (Hold).