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Costco’s Solid Comps Trend Exemplify its Sound Fundamentals


Costco Wholesale Corporation COST continued with positive comparable-store sales (comps), consequently sidelining the woes which have gripped the brick-and-mortar retailers for some time now. Major chains are grappling with sluggish store and mall traffic as consumers switch to online shopping from the comfort of their homes. But Costco seems somewhat resilient to the challenging retail backdrop. We believe that the recent hike in annual membership fees and increased penetration of Citi Visa co-brand card program will also benefit the stock in the near term.

Despite Costco’s sound fundamentals, we note that shares of this Zacks Rank #3 (Hold) stock have dropped 9.4% in the past three months compared with the industry’s decline of roughly 8.1%. So, what suddenly went wrong with the stock? You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Costco were hit hard, after the news of Whole Foods Market, Inc.’s WFM buyout by Amazon.com Inc. AMZN surfaced.

Costco Continue to Post Solid Comps

Comps for four-week ended Jul 30, 2017 increased 6.2%, following an increase of 6% in June, 4.1% in May, 3% in April, 6% in March, 4% in February and 7% in January. The company generated net sales of $9.41 billion in July, up 8.8% year over year. Notably, net sales increased 7%, 7%, 5%, 9%, 8% and 9% in June, May, April, March, February and January, respectively.

Comps for July reflect an increase of 6%, 7.2% and 6.3% at the U.S., Canada and Other International locations, respectively. Excluding the impact of foreign currency fluctuations and gasoline prices, Costco’s comps for the month under review rose 5.3%. The company recorded comps increase of 5.5%, 4% and 5.9% at the U.S., Canada and Other International locations.

For the 48-week period ended Jul 30, 2017, Costco reported 3.8% jump in comps, displaying an increase of 4.1%, 4.3% and 1.7% at the U.S., Canada and Other International locations. Net sales for the period came in at $113.70 billion, an increase of 6.1% from the year-ago period.

Costco, which faces stiff competition from Wal-Mart Stores Inc. WMT, operates 736 warehouses, comprising 511 warehouses in the U.S. and Puerto Rico, 97 in Canada, 37 in Mexico, 28 in the UK, 25 in Japan, 13 in Korea, 13 in Taiwan, eight in Australia, two in Spain, one in Iceland and one in France.

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