Costco Beats Competition, Reports Strong Sales in December



December comps remained strong

Costco (COST) finished 2017 on a strong note. The company continued its growth momentum during the key holiday season and reported stellar comparable store sales (or comps) despite heightened competition from Amazon.com (AMZN), Walmart (WMT), and Target (TGT).

Costco’s comps rose 11.5% for the five-week period ended December 31, 2017. Regionally, the company’s comps improved 10.5% in the US (SPY) and 11.9% in Canada. Moreover, Costco’s comps jumped 17.0% at other international locations.

During the reported period, Costco’s net sales marked an increase of 14.3% year-over-year to ~$14.9 billion. The company’s sales from its digital arm maintained its growth momentum and rose 33.3% in December.

As can be seen in the graph above, Costco’s December 2017 sales data reflects strong growth over December 2016. During December 2016, Costco’s comparable store sales rose 3.0%, while its net sales improved 5.0%.

Excluding the movement in currency rates and gasoline prices, the company’s comps improved 8.8% in December 2017. Notably, comps grew 9.1% in the US, 6.1% in Canada, and 9.6% at other international locations.

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Analysts’ expectations for fiscal 2018

Analysts expect Costco to generate strong sales in fiscal 2018. Analysts project the company’s top line to improve by 7.1% in fiscal 2018, driven by the rise in average shopping frequency, particularly in the US. The company’s continued price investments, expanded offerings, increased membership fee income, e-commerce initiatives, and square footage expansion should support its sales growth rate.

In comparison, analysts expect rival Walmart to also register healthy sales growth in 2018 owing to several consumer-friendly initiatives, including fast delivery, grocery pickup services, and store remodeling. Meanwhile, Target’s top line is also anticipated to rise, driven by the strong performance of its digital arm and increased sales at its small-format stores.


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