What To Make Of Costco’s December Comparable Sales

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Costco (NASDAQ: COST) continued to see positive sales trends in December. The retailer’s net sales grew 14% year-over-year (y-o-y) to $15 billion in December. In addition, the company’s comparable sales increased a strong 12% in the same period, beating the consensus expectations of 8%. In fact, Costco’s comparable sales increased 11% in the U.S., 12% in Canada and 17% in other international markets. Also, Costco’s overall comparable sales – excluding the impact of gasoline sales and foreign currency fluctuations – grew by 9%, driven by 9% growth in the U.S., 6% growth in Canada and a 10% rise in international markets. Clearly, Costco’s comparable sales growth remains strong in all regions of the world. Moreover, Costco’s December performance was its best comparable sales performance for the year, although it benefited from one additional shopping day, which boosted its results by approximately 2.5%. The company performed remarkably well in the critical holiday season with solid November and December results.

Costco’s December comparable sales were also in line with the company’s fiscal first quarter comparable sales of 11%. Overall, the retailer’s continued growth momentum confirms that it is still able to grow traffic at its brick and mortar warehouses despite stiff competition in the grocery sector, and growing overlap with Amazon (NASDAQ: AMZN) since it purchased Whole Foods. However, the company’s stock was slightly down after the December results. This could be due to the effect of fuel and currency tailwinds.

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The biggest positive takeaway from the December report was the jump in Costco’s U.S. comparable sales. The company’s U.S. comparable sales jumped to 11% in December from just 6% in January 2017. Costco’s organic performance has been keeping pace with the U.S. retail industry, in large part due to its business model. We expect the market trends to continue into December as well (industry data not available yet).

Costco has also been able to grow its e-commerce comparable sales gradually from 26% in August to 33% in December. The company is driving online sales with ongoing site improvements, improved online marketing activities, and distinct products and services. The retailer also rolled out two new online delivery related offerings on dry and fresh grocery.

Our $185 price estimate for Costco’s stock is slightly below the current market price.

Have more questions about Costco? Please refer to our complete analysis for Costco

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