Costco Stellar Comps Performance Aiding Stock's Bullish Run

Zacks Equity Research

Retail is no more constrained to the four walls of its brick-&-mortar existence. Instead it is rapidly embracing the concepts of an increasingly digitized world as advancing technology and digital transformation are playing key roles in shaping consumer shopping patterns. In this ever-evolving retail landscape, Costco Wholesale Corporation COST has been able to create a niche for itself.

This Issaquah, WA-based company’s growth strategies, better price management, strong membership trends and increasing penetration of e-commerce business have been aiding the performance. Moreover, favorable job scenario, rising wages and improved consumer sentiment are other important factors. Cumulatively, these factors have aided the company in sustaining impressive comparable sales (comps) run.

Definitely, Costco’s stellar comps trend is shaping this Zacks Rank #2 (Buy) stock’s bullish run on the bourses. Shares of the company have surged 46% in a year, comfortably outpacing the industry’s rally of 35.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


 

The company witnessed comps growth of 6.6% during the month of January 2020. This follows an increase of 9% in December 2019, 5.3% in November, 5.7% in October and 4.2% in September. Meanwhile, net sales improved 8% to $11.57 billion in the month of January. This follows a rise of 10.5%, 6.7%, 6.8% and 5.6% in December, November, October and September, respectively.

Clearly, Costco looks quite disciplined in its approach of tackling prevailing headwinds — stiff competition from online retailers and aggressive pricing strategy. Moreover, with the wave of digital transformation hitting the sector, it is fast adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores.

It is steadily expanding e-commerce capabilities in the United States, Canada, the U.K., Mexico, Korea, Taiwan and Japan. E-commerce comparable sales surged 17.6% in the month of January.

Bottom Line

Costco continues to be one of the dominant warehouse retailers based on the breadth and quality of merchandise offered. In fact, its strategy of selling products at heavily discounted prices has helped it to remain on growth track. Additionally, a differentiated product range enables the company to provide an upscale shopping experience for members.

It is also focused on ramping up investments in the wake of rising competition from the likes of Dollar Tree DLTR, Dollar General DG and Target TGT. We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.

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