Shares of Costco Wholesale Corp
On Thursday, the company reported a 9.9% year-on-year increase in retail sales to $26.15 billion for the five weeks ended Dec. 31, 2023.
December sales report was strong, with a headline comp of 8.5% and a core merchandise comp of 8.1%. Excluding the timing of New Year's Day - an extra shopping day in December - that helped the comp by ~300 bps, the adjusted headline comp was 5.5%. The adjusted headline comp far exceeded Telsey Advisory Group's target of 2.0%.
The Costco Wholesale Analyst: Telsey Advisory Group analyst Joseph Feldman maintains Outperform on Costco stock with a price target of $700.
The Costco Wholesale Thesis: Costco's impressive December performance surpassed expectations in both comparable sales and traffic. It reflects its resilience in an uncertain market landscape.
The company's adept execution remains consistent, positioning it as a continued leader in market share, bolstered by robust sales and a substantial membership base of approximately 130 million.
Looking ahead to Fiscal Year 2024, Feldman anticipates Costco to sustain solid earnings per share (EPS) growth. Expect a moderate-to-strong comparable sales increase, substantial growth in membership fees, utilization of customer data, and efficient cost management strategies.
The January sales forecast predicts a slight decline in comparable sales due to factors like gas and foreign exchange effects. But core merchandise sales, excluding these influences, remain steady.
Despite short-term challenges, Feldman expects sustained solid traffic, up 3.0%, as consumers seek value. Costco's strategic resilience and strong fundamentals position it as an enticing investment opportunity, poised for continued growth despite temporary market fluctuations.
COST Price Action: Shares of Costco Wholesale had risen by 1.27% to $656.57 at the time of publication on Friday.
