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Will Costco Stock Rise More after Its Fiscal 1Q18 Results?

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Part 3
Will Costco Stock Rise More after Its Fiscal 1Q18 Results? PART 3 OF 6

What’s Driving Costco’s Industry-Leading Sales?

What analysts’ project for 1Q18

Costco (COST) continues to stun investors with its industry-leading sales growth. Despite several analysts doubting the company’s prospects after the combination of Amazon (AMZN) and Whole Foods, Costco continued to report stellar sales due to its rising store traffic and average transaction size, primarily in the US (SPY). Analysts expect Costco’s fiscal 1Q18 total sales to rise 11.7% YoY (year-over-year) to $31.4 billion.

What’s Driving Costco’s Industry-Leading Sales?

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Analyzing preliminary sales data

Costco reported preliminary sales data for 1Q18 on November 29, 2017, along with its monthly sales numbers. The company’s net sales (excluding membership fee income) rose 13.3% to $31.1 billion in fiscal 1Q18 due to higher comps across all of the regions. Costco’s total sales include revenues from its warehouses and membership fees. Costco’s comps grew 10.3% in the US, while Canada and other international locations grew 11.3% and 10.1%, respectively.

Excluding the impact of changes in fuel prices and currency movement, Costco’s comps in the US rose 8.7%. Meanwhile, its comps in Canada and other international markets grew 4.3% and 8.2%, respectively.

Costco’s net sales in the US rose 1.5% due to the calendar shift in pre-Thanksgiving and Black Friday weekend sales. The company’s e-commerce sales rose 43.6% during the 12-week period ending November 26, 2017.

Sam’s Club, owned by Walmart (WMT), reported net sales of $13.6 billion (ex-fuel) in fiscal 3Q18—an increase of 3.2% YoY. Its comps grew 2.8%, which reflected higher traffic. However, the average ticket size remained low. Target (TGT) reported improved comps in fiscal 3Q17. The company’s comps rose 0.9% due to higher store traffic. However, the average transaction size fell on a YoY basis.

In November, Costco reported better-than-expected comps. Its comps rose 10.8%, while its e-commerce sales rose 39.0%. Excluding the fluctuations in fuel prices and currency rates, its comps grew 7.9%.

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