Costco Wholesale Corporation
COST
has time and again proved its mettle. The company has weathered multiple market gyrations and still delivered returns to investors. Strategic investments, a customer-centric approach, merchandise initiatives and emphasis on memberships have been the discount retailer’s primary strengths. These have helped post consistent sales growth.
Impressive Sales Trend
Costco’s growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its upbeat performance. Amid the surging inflation, low-to-middle income consumers prefer discount stores to meet their day-to-day needs. Cumulatively, these have been aiding this Issaquah, WA-based company in registering impressive sales numbers.
Costco’s net sales increased 20.4% to $22.78 billion for the retail month of June, the five-week period ended Jul 3, 2022, from $18.92 billion last year. This followed an increase of 16.9% in May and 13.9% in April.
Management informed that owing to the timing of Independence Day this year’s June retail month had one extra shopping day in the United States compared with the last year. This contributed 2% to overall sales and comparable sales as well as 3% to U.S. sales and comparable sales.
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Stellar Comparable Sales Run
Comparable sales for the retail month of June jumped 18.1%. This followed increases of 15.5% and 12.6% in May and April, respectively. Comparable sales for the retail month of June reflected an improvement of 21.5%, 14.2% and 4.7% in the United States, Canada and Other International locations, respectively.
Excluding the impacts of changes in gasoline prices and foreign exchange, comparable sales for the month under discussion rose 13% on improvements of 13.2%, 13.7% and 11.9% in the United States, Canada and Other International locations, respectively.
E-Commerce on the Rise
Costco has been rapidly adopting the omni-channel mantra in a bid to provide a seamless shopping experience, both online and at stores. The company has been gradually expanding its e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.
We note that comparable e-commerce sales rose 7% in June. This followed increases of 6.3% and 5.7% in May and April, respectively. Costco Logistics bolstered e-commerce capabilities and facilitated the selling of “big and bulky” items.
Bottom Line
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. The company’s distinctive membership business model and pricing power set it apart from the traditional players. A favorable product mix, steady store traffic, pricing power and strong liquidity position should help Costco to keep outperforming.
Impressively, Costco has outpaced the
Retail – Discount Stores industry
in the past year. We note that shares of this Zacks Rank #3 (Hold) company have appreciated 20.1% in the past year against the industry’s decline of 6.1%.
3 Stocks Looking Red Hot
Here we highlight three better-ranked stocks, namely,
Dollar Tree
DLTR
,
Boot Barn Holdings
BOOT
and
Kroger
KR
.
The discount retailer Dollar Tree currently sports a Zacks Rank #1 (Strong Buy). DLTR has an expected EPS growth rate of 15.5% for three-five years. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS suggests growth of 6.7% and 40.5%, respectively, from the corresponding year-ago period’s levels. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.
Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories, has a Zacks Rank #1. BOOT has an expected EPS growth rate of 20% for three-five years.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period.
Kroger, the renowned grocery retailer, carries a Zacks Rank #2 (Buy) present. The company has an expected EPS growth rate of 11.3% for three-five years.
The Zacks Consensus Estimate for Kroger’s current financial-year sales and EPS suggests growth of 6.7% and 6.3%, respectively, from the year-ago reported number. KR has a trailing four-quarter earnings surprise of 20.3%, on average.
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