Costco (COST) Thrives on Impressive Comps Show & Online Sales

Costco Wholesale Corporation’s COST growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its upbeat sales performance. Additionally, recent stimulus checks to individuals have been also fueling demand. The impact of same was visible in the company’s January’s sales results that exceeded analysts’ expectations.

This operator of membership warehouses registered an increase of 17.9% in net sales to $13.64 billion during the four-week period ended Jan 31, 2021. This followed an improvement of 12.3%, 15.1% and 15.9% in the months of December, November and October, respectively.

Stellar Comps Performance

Amid the pandemic, people are exhibiting a preference for discount stores for essentials or other daily purchases. Apparently, Costco has emerged as viable option for them. The company’s differentiated product range resonates well with customers’ spending habits.

Markedly, Costco’s strategy to sell products at discounted prices has helped it expand customer base. The company’s comparable sales four-week period ended Jan 31, 2021 rose 15.9%. This followed an increase of 10.7%, 13.4% and 14.4% in the months of December, November and October, respectively. The monthly comparable sales reflect an increase of 15.4%, 15.2% and 19% in the United States, Canada and Other International locations, respectively.

Excluding the impacts from change in gasoline prices and foreign exchange, comparable sales for the month under discussion rose 15.7% on an improvement of 16.4%, 12.2% and 15.3% in the United States, Canada and Other International locations, respectively.

Sturdy E-commerce Sales

Undoubtedly, Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or at stores. The company is also on path to gradually provide curbside pickup facility to customers and is currently testing the same at three stores in Albuquerque, NM.

Consumers’ increased shift to online purchasing due to the coronavirus outbreak seems to have worked in favor of the company. Its e-commerce sales have been showcasing a sharp increase courtesy of the rising stay-at-home trend to maintain social distance.

We note that e-commerce comparable sales soared 106.7% during the month of January. This followed an increase of 62.5%, 71.3% and 91.1% in the months of December, November and October, respectively. Costco operates e-commerce sites in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.

Bottom Line

Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. It is also focused on ramping up investments in the wake of rising competition from the likes of Dollar Tree DLTR, Dollar General DG and Target TGT. We believe that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.

We also note that shares of this Zacks Rank #3 (Hold) company have advanced approximately 17.1% in the past year compared with the industry’s rally of 22.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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