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Costco: Impressive Comparable Sales Growth in April


May. 9 2019, Published 8:18 a.m. ET

Comparable sales rose 5.4% in April

Costco (COST) had an impressive comparable sales growth rate for April. The company posted a 5.4% increase in its comps for the four weeks ending May 5. The net sales increased 7.3% to $11.6 billion.

Costco generated strong growth despite facing tough YoY (year-over-year) comparisons. Costco’s comps rose 7.3% during the same period last year, while the net sales increased 13.1%.

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By sales regions, the comparable sales rose 7.7% in the United States, which reflected continued traffic growth. A strong performance in the domestic market will likely support the stock. Costco’s comps fell 1.9% in Canada and rose 0.9% in other international locations.

Excluding volatility in the foreign exchange rate and gasoline prices, Costco’s comparable sales rose 5.2% due to 5.6% growth in the United States. The comps rose 2.3% in Canada and 6.0% in other international locations.

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Costco faces tough YoY comparisons, which could limit the sales growth rate. However, Costco is expected to outperform its peers with its comps growth rate. We expect Walmart (WMT) and Target (TGT) to sustain the momentum in their comps. However, the growth rate will likely to remain lower than Costco.

Costco’s continued price investments to widen the value gap with its peers, expanded assortments, and high-membership renewal rates are expected to drive the traffic and support the comps growth rate in upcoming quarters. However, the comps growth rate is expected to decelerate slightly due to tough comparisons.

Costco shares were trading ~1% higher during the pre-market session after its solid April sales numbers. J.P. Morgan raised the target price to $252 from $248 per share.


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