What Conclusions Can Be Drawn From Costco’s March Comparable Sales?
Costco‘s (NASDAQ:COST) stock has increased slightly since it reported strong March sales last week. The retailer’s net sales grew 9% year-over-year (y-o-y) to $11.64 billion in March, and the company’s comparable sales increased a better-than-expected 6% in the same period. Costco’s comparable sales increased 7% in the U.S., 3% in Canada and 4% in other international markets. Interestingly, Costco’s overall comparable sales – excluding the impact of gasoline sales and foreign currency fluctuations – grew by 5%, driven by 6% growth in the U.S., 3% growth in Canada and a 6% rise in other international markets.
Rise In U.S. Comparable Sales
The biggest positive takeaway from the March report was the jump in Costco’s U.S. comparable sales. The company’s U.S. comparable sales grew in the first three months of 2017, after showing flattish trends for most of the previous year. The rise in gasoline prices, which increased 17% y-o-y in March 2017, could be one of the reasons for this growth.
Costco recently announced that it would push through a membership fee increase to new members from June 1. In addition, the company reported that the maximum annual 2% reward associated with the Executive membership would increase from $750 to $1,000. Going forward, it will be interesting to see how the membership fee hike impacts the company’s domestic comparable sales growth. 
Costco’s organic performance has been keeping pace with the U.S. retail industry, primarily due to its business model. For instance, Costco’s net sales in January increased 6%, similar to the U.S. retail y-o-y sales growth. This trend has sustained for the past three months, which reflects the core strength of Costco’s U.S. business. We expect the trend to continue in March as well (industry data not available yet).
Growing Sales In The Canadian Market
Costco reported strong comparable sales growth of 3% in Canada in March. This growth could be attributed to the appreciation of the Canadian dollar relative to the U.S. dollar in the same period. The retailer boasts more than 10 million Costco members in Canada with a renewal rate of 90%, which helps the company earn significantly through its membership fees only. Costco operates 94 stores in Canada (as of Feb 2017), which is the greatest number of stores in any market outside of the U.S., with impressive 8% comparable sales growth.
Have more questions about Costco? Please refer to our complete analysis for Costco
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap |