Costco exceeds analysts’ estimates
Costco Wholesale (COST) reported stronger-than-expected fiscal 1Q18 results, surpassing analysts’ expectations for both sales and EPS (earnings per share). Costco reported double-digit growth in its top and bottom lines, setting it apart from Walmart (WMT) and Target (TGT). Following the release of the strong results, Costco stock rose 2.3% after hours.
Investors doubted Costco’s prospects with the growing threat from Amazon (AMZN) after its Whole Foods Market acquisition and consumers shifting to online shopping. The stock was also pressured due to Costco lagging behind Walmart and Target in digital capabilities. Both companies, especially Walmart, have ramped up their digital initiatives, boosting sales.
Despite challenges, Costco reported strong sales, driven by rising store traffic and a higher average ticket size. The company’s focus on value pricing, better offerings, and healthy membership renewal rates (90.0% in the United States and Canada and 87.2% worldwide) boosted its sales growth. Favorable currency rates, Citi’s cobranded Costco Anywhere Visa card, and gasoline price inflation contributed to the company’s industry-leading bottom-line growth.
As of December 14, 2017, Costco stock had risen ~22.3% year-to-date. On the contrary, Target stock has fallen 14.2%. Walmart has outperformed peers, thanks to its digital initiatives, and has grown 40.5%, and the S&P 500 (SPX) has risen 18.5%.