Costco Rises as Margins Improve in Competitive Wholesale Market

(Bloomberg) -- Costco Wholesale Corp. rose in late trading as the retailer’s margins beat projections in what’s becoming an increasingly competitive warehouse-club market.

• Same-store U.S. sales excluding gas rose 7.2 percent in the second quarter, beating estimates, while gross profit margins expanded.

Key Insights

• Costco is the lead dog in the U.S. warehouse-club market, but its rivals are gaining some ground. Shares of smaller rival BJ’s Wholesale Club Holdings Inc. have risen about 13 percent this year and it just reported its best-ever membership renewal rate, giving it the confidence to raise its annual fee. Sam’s Club, owned by Walmart Inc., has posted 12 straight quarters of comparable-store sales gains thanks to improvements in fresh food and private label goods, as well as new technologies that help get shoppers through the store faster.
• Costco hasn’t been standing still: It added a line of Apple laptop and desktop computers just in time for the holiday season, has expanded its same-day grocery delivery service to cover most of the U.S. and will open its first store in China later this year.

Market Reaction

• Costco rose as much as 3.3 percent in after-hours trading. Shares had gained 6.4 percent through Thursday’s close, compared to the 9.7 percent increase from the S&P 500.
• For more on the numbers, click here.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Anne Riley Moffat, Jonathan Roeder

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