Costco Wholesale Executes Well In Tough Operating Environment, Analyst Says

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  • Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Costco Wholesale Corporation COST and a price target of $580.
  • The analyst said Costco reported a better-than-expected December comparable sale of 5.5% versus the forecast of 1.3%.
  • Excluding the gas (+20 basis points) and FX (-200 basis points) net headwind of ~180 basis points, the core merchandise comp came in at 7.3%, more than double the projection of 3.5%.
  • All three segments reported solid comparable sales, the analyst noted.
  • The analyst said that Costco continues to generate strong results, reflecting high member loyalty, its focus on value, and digital improvements.
  • In December, total traffic increased 4.6% (U.S. +3.6%), and the average ticket rose 1.0%. The company noted a slight sequential decrease in inflation in food & sundries and fresh foods from November.
  • E-commerce sales decreased 6.4% against 17.8% growth last year.
  • The analyst projects January comparable sales of 4.0% versus 14.2% last year.
  • The analyst estimates a gas and FX net headwind of ~200 bps, assuming the latest prices and rates.
  • Costco continues to execute well in a tough operating environment and should remain a share gainer, with its solid sales and high membership renewal rates, said the analyst.
  • Also Read4 Costco Analysts On Q1 Earnings Miss: 'Consumables Strength And Improving Membership'
  • Price Action: COST shares are trading higher by 6.59% at $479.88 on the last check Friday.
  • Photo Via Wikimedia Commons
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