Reward 1000 Tiger-coinsAs for Costco, compared to his company's financial status and stock price, I care most about whether the price of hot dogs will increase. Is anyone as concerned as I am about hot dog price hikes?
A few days ago, $Pepsi(PEP)$ said it would continue passing costs on to consumers by increasing prices and/or shrinking quantity. With such severe inflation, the price of Cola is going to rise. Can Costco's hot dogs withstand the pressure of cost?
Sales Rise During Recession
The consumer has been weakening over the past few months, but Costco's sales keep ticking up. For the five-week retail month of June, Costco saw U.S. sales rise 21.5% compared to last year's numbers. These results were skewed by an extra day compared to last year, which added an extra 3% growth. Still, 18.5% growth for a commerce giant like Costco is impressive. It's also about 2% faster than Costco's sales have risen over the past 44 weeks, indicating consumers are choosing options that may save them money over the long haul.
When we look to history to see how Costco might manage in the current economic environment. During the last major recession in 2008 and 2009, Costco's revenue hardly dipped at all:
Compared to Competitors
With a plunge of nearly 25%, $Target(TGT)$ suffered the second-largest drop in share price of any S&P 500 company during the latest earnings season.
The results for Target were truly dismal. Operating income plummeted 43.3% to $1.3 billion while adjusted EPS also swooned, falling to $2.19, a drop of 40.7%. The retailer's cost of sales also increased, from $16.7 billion in the comparable quarter to $18.5 billion in Q1 2022.
The company's adjusted earnings per share (EPS) missed consensus estimates, down 23.1% year over year (YOY).
Walmart said that inflation, especially in food and fuel, created more pressure on its operating costs than expected, leading to unexpected results for its bottom line.
What do analysts think?
Barron’s recently named Costco head Craig Jelnick as one of this year’s best CEOs, citing the shares’ big run under his watch.
Deutsche Bank expects that trend to continue, and the shares are rising following the firm’s upgrade.
Analyst Krisztina Katai boosted her rating on Costco Wholesale shares to Buy from Hold on Thursday, and her price target to $579 from $525. “Costco is one of the most consistent operators in our group, and its steady traffic gains and high membership renewal rates serve as key differentiators in an increasingly uncertain backdrop,” she writes.
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Comments
I am bullish on $Costco(COST)$ as it is a consistent performer. Costco has beaten both Walmart and the S&P500 consistently over the last 10 years. Costco has produced an amazing return of a huge 723% during that time.
Costco CEO, Craig Jelinek is the key driver behind Costco's phenomenal growth. His approach is to put his employees first, treat them fairly and value them for their work. His leadership scored an "A" by his 1150 employees.
Costco 's phenomenal success and competitive edge is due to its membership model, private label and low pricing strategy which gives Costco an wide economic moat that is impervious to economic cycles.
Costco is the 3rd largest retailer in the US!
Costco is the kind of quality stock that I like to own. It is profitable, has a solid balance sheet and an excellent management. Best of all it never fails to pay its quarterly dividends for the last 16 years. How good is that!
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