Costco Fights Off Amazon and Walmart and Gets Rewarded For It


(Bloomberg) -- Costco Wholesale Corp. rose to a record high Friday after the membership warehouse retailer’s August same-store sales topped analysts’ estimates, marking an “impressive” end to its fiscal year, according to analysts at both Telsey Advisory Group and Cowen.

Shares rose as much as 2.6% and are now up 49% so far this year, more than double the percentage gain of its closest pure-play rival, BJ’s Wholesale Club Holdings Inc.

Costco Fights Off Amazon and Walmart and Gets Rewarded For It

Here’s what Wall Street had to say following the monthly sales report.

Telsey Advisory, Joseph Feldman

  • “We see the August performance as quite solid, especially given the difficult comparison of 9.2% from last year and tough retail environment”
  • Highlighted the strong traffic increase of 4.8%, including 4.9% growth in the U.S.; e-commerce sales grew about 24%
  • Feldman has an outperform rating on the stock and believes Costco will remain a market share gainer, with “solid sales and traffic trends, high membership renewal rates, and square footage growth of low-single digits”; price target is $305

Stifel, Mark Astrachan

  • “Current trends remain solid and we also think the results indicate Costco can coexist with large hardline competitors like Walmart and have limited cannibalization from Amazon”
  • Believes “it is probable”that Costco declares a special dividend within the next couple of quarters; maintains his buy rating and boosted his price target to $310 from $289 to reflect the company’s “best in class” growth

Cowen, Oliver Chen

  • Costco “continues to show its retail dominance as physical and digital momentum was again on display” in August and demonstrate “executional excellence in an increasingly difficult operating environment”
  • The recent opening of its first store in China could be a catalyst for additional growth across the country over the next several years
  • Costco is in a relatively better position to handle rising tariffs due to its large scale, which provides leverage when negotiating with vendors; global supply chain, which provides flexibility to re-position sourcing; has strong private brand equity; and Costco is more of an item retailer (vs category) which enables greater flexibility to shift products
  • Rates outperform, price target $325

RBC Capital Markets, Scot Ciccarelli

  • Yet another “impressive” sales result amid “robust” traffic growth
  • Costco continues to grow both ticket and traffic due to its “sustained competitive pricing model,” which the analyst believes “creates a sizable competitive barrier and supports the robust valuation”
  • Rates outperform; boosted price target to $321 from $299

Guggenheim, John Heinbockel

  • Strength in the U.S. and the hardlines category drove the “solid” August sales beat
  • Heinbockel is now more confident in his estimate for 9.3% Ebitda growth in the fourth quarter, above the Street’s 8.6% expectation
    • NOTE: Costco reports fourth-quarter results Oct. 3
  • That said, shares “already sport” one of the highest valuations in large-cap retail, at 18x CY2020 estimated Ebitda, “a level buttressed further by the well-publicized opening of the Shanghai club”
  • Remains neutral-rated

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