Analyzing Costco’s stock price performance and shareholder returns

Costco’s (COST) stock price has hit several all-time highs over the past year. The last record high of $168.87 came on December 8, 2015. That’s the day before the company announced results for fiscal 1Q16, which ended November 22, 2015.

Costco has consistently outperformed the market benchmark, the S&P 500 Index, and the S&P 500 Food and Staples Retail Index. Costco’s stock price was up 13.9% in 2015 compared to -0.7% for the S&P 500 Index and the 4% gain experienced by the Consumer Staples Select Sector SPDR Fund (XLP).

Costco Has Consistently Outperformed Industry Benchmark

Costco’s consistent returns performance

Over the last five-year period, Costco provided total annualized returns of 19.4%, nearly double the S&P 500 Index’s (SPY) (IVV) (VOO) 10.1% return. The company also outpaced the S&P 500 Food & Staples Retail Index (VCR) (XLP) (FXG), which posted a 14.6% return over the same period.

The Consumer Staples Select Sector SPDR Fund (XLP) and the SPDR S&P Retail ETF (XRT) posted returns of 13.5% and 12.1%, respectively, over the same period[1. Computed through January 15, 2016].

Among the peer group considered, Kroger (KR) and Dollar Tree (DLTR) have posted the highest returns at 31.2% and 24.5%, respectively. Consistency in comparable store sales has contributed to the outperformance of their respective stocks.

Costco also managed to post a respectable 12.8% return over the past year compared to the negative 3.6% and the negative 6.2% posted by the S&P 500 Index and the S&P 500 Food & Staples Retail Index, respectively. Costco’s performance has been boosted by both top-line and bottom-line growth as well as consistency in comparable warehouse sales growth excluding the impact of adverse forex movements and the decline in energy prices.

Walmart (WMT) and Target (TGT) have lagged the most among the peer group. Walmart posted a negative 27.2% return over the past one year, primarily due to the lower guidance it gave at its investor meeting in October 2015.

Despite meeting Wall Street earnings expectations last quarter, Target’s stock performance has lagged over the past year. However, in fiscal 2Q16, the company did report slower-than-expected growth in e-commerce sales. A general malaise in retail sales along with higher stock market volatility appear to have affected Target’s stock performance.

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