Costco's December Sales Should Benefit From Inflation As Consumers Search For Value, Analyst Says

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Costco Wholesale Corporation COST with a price target of $580.
The analyst forecasts December total comparable sales of 1.3% versus 14.5% last year.
In December, gas prices declined ~2.5% Y/Y, which the analyst estimates should pressure the total comparable sales by ~25 basis points.
Furthermore, the analyst added that the stronger U.S. dollar should be an estimated headwind of ~200 basis points.
The analyst expects December traffic to be up 1.0% and average ticket to be up 0.3%, partly helped by inflation.
The analyst projects digital sales to decrease 10%, primarily due to lapping a tough comparison of 17.8% from last year.
The analyst noted that Costco's digital business is skewed to discretionary categories, such as electronics, which are likely to be soft this holiday season.
The analyst expects Food & Sundries and Fresh Foods to outperform, helped by increased at-home consumption and inflation.
The analyst anticipates Non-Consumables to underperform the company average, given the pressure on discretionary spending related to high inflation, elevated promotions across retail, and a tough comparison of up LDD from last year.
The analyst believes Costco should remain a share gainer, with its solid sales and high membership renewal rates.
In FY23, the company should continue to generate double-digit EPS growth, driven by Mid-Single-Digit comparable sales, High-Single-Digit membership fee income growth, healthy digital growth, leverage of customer data, and effective management of costs.
The analyst mentioned that Costco's December sales should continue to benefit from high food and overall inflation, pushing consumers to the store to search for value.
Also Read: If You Invested $1,000 In Costco (COST) Stock At Its COVID-19 Pandemic Low, Here's How Much You'd Have Now
Price Action: COST shares are trading higher by 0.96% at $457.35 on the last check Thursday.

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