Costco (COST) continues to report an industry-leading comparable sales growth rate. However, the deceleration in the sales growth rate and high valuation annoyed investors. On April 10, Costco shares fell ~1% in the after-hours of trading following the company’s March sales results.
Costco’s comps rose 5.7% for the five weeks ending April 7. The net sales increased 7.4% to $13.87 billion. Costco’s comps increased 8.6% during the same period the previous year. The net sales rose ~11% in March 2018.
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By sales regions, the comps rose 6.9% in the United States due to continued traffic growth. The comps increased 3.8% and 1.6% in Canada and other international locations, respectively. Excluding the impact of currency volatility and the changes in gasoline prices, Costco’s comps rose 5.9%. The comps increased 5.5% in the United States, 6.7% in Canada, and 7.4% in other international locations.
Costco faces tough YoY (year-over-year) comps, which could limit the comps growth rate. However, Costco could continue to outperform its peers including Walmart (WMT), Target (TGT), and Kroger (KR) with its comps growth rate.
Costco’s investment in pricing to widen the value gap with its peers and expanded assortments are expected to drive the traffic and its comps in the coming quarters. However, a slight deceleration in the comps growth rate and high valuation could limit the upside in the stock.