Costco Remains Steadfast Despite Uncertainties: Analyst Forecasts Robust FY24 Growth

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Costco Wholesale Corporation COST with the same price target of $575.

In September, gas prices increased in the low-single-digit to mid-single-digit range, which the analyst estimates should help the total comparable sales by about 40 basis points.

The analyst expects traffic to be up 5.5% on top of 4.7% last year, offset by an average ticket decrease of 1.6%, reflecting lower discretionary spending and moderating inflation, added the analyst.

The analyst projects digital sales to be flattish Y/Y since the growth of digital business is impacted by its mix being skewed toward bigger ticket discretionary items, such as furniture, which still remains soft.

The analyst expects Food & Sundries and Fresh Foods to outperform, helped by the continued healthy at-home consumption trends. 

The analyst foresees Non-Consumables to underperform the company average, given pressure on discretionary spending related to the broader shift toward services and a tough comparison of mid-single digits from last year. 

The analyst believes Costco is executing well in this uncertain operating environment and should remain a share gainer, with its solid sales and high membership renewal rates.

In FY24, Costco should continue to generate solid EPS growth, driven by a mid-single-digit comp, mid-single to high-single-digit membership fee income growth, leverage of customer data, and effective management of merchandising and costs, concluded the analyst.

Costco will report September sales after the markets close on Wednesday, October 4.

The analyst forecasts a total comp of 3.8% versus 8.5% last year.

Price Action: COST shares are trading higher by 0.94% at $570.28 on the last check Monday.