Costco Impresses Investors with Strong Comps Growth in May



Costco’s comps in May jump 11.7%

Costco (COST) continued with its impressive sales run in May. The company reported yet another month of stellar comps growth. Costco’s comparable-store sales, or comps, jumped 11.7% for the four-week period ended June 3, which also marks a steep improvement from the year-ago period where comps grew only 4%.

By region, Costco’s comps rose 11.7% in the US, 13.0% in Canada, and 9.4% in other international locations. Net sales jumped 14.1% to $11.0 billion in May with e-commerce sales recording 34.4% growth.

Excluding the changes in gas prices and currency rates, Costco’s comps in May rose 8.0% with the US, Canada, and other international locations witnessing growth of 8.7%, 5.4%, and 7.4%, respectively.

What’s behind Costco’s impressive comps?

Costco’s strong comps were thanks to its ability to drive traffic despite facing heightened competition. During the recently concluded quarter, Costco’s management revealed that its traffic soared 5.1% in the fiscal third quarter, a much higher rate when compared with both Walmart (WMT) and Target (TGT).

Costco’s loyal membership base, high membership renewal rates (90.1% at the end of fiscal Q3 2018), and value proposition are driving its sales higher. Costco continues to invest in price to widen the value gap with competitors, which is driving traffic higher. Also, the company’s efforts to enhance its services, like improving its search, checkout, and return processes, have resonated with shoppers. Moreover, Costco’s e-commerce business is small, but it is growing at a healthy rate.

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