Costco (COST) continues to impress with its sales. The membership-only retailer recently delivered strong sales for September 2021, marking a solid start to FY22.
Costco delivered net sales of $19.50 billion for the retail month of September, reflecting growth of 15.8% over the prior year. This includes an incredible comps (comparable sales) growth of 14.3%. Its comps rose by 14.6% in the U.S. and 14.9% in Canada. Meanwhile, comps increased by 12% in the other international markets.
Impressed with Costco’s robust sales, Stephanie Wissink of Jefferies stated that “COST’s September results are a strong start to an important quarter to support our view that COST will see sustained gains from a bigger, higher quality member base and elevated levels of engagement.”
Undoubtedly, Costco’s loyal membership base remains a key catalyst to its growth. It’s interesting to note that Costco’s membership renewal trends remain strong, irrespective of the heightened competitive activity in the retail space. The retailer had 111.6 million cardholders at the end of the most recent quarter.
Furthermore, its membership renewal rate stood high at 91.3% for the U.S. and Canada. My bullish view remains intact on Costco stock.
Similarly bullish, Wissink has a Buy rating on Costco stock with a price target of $525, reflecting 16.2% upside potential.
While Costco’s comps exceeded Wissink’s estimates, she left her estimates unchanged, citing supply-chain issues. She stated that Costco’s “Sept. comps were +680bps ahead of our Q1 estimate (and +630bps on a 2YR basis), but given supply chain disruptions resulting in higher inventory availability risk, we leave estimates unchanged for now.”
Nevertheless, Costco is taking initiatives to offset the inflationary pressure on its margins, which stem from supply-chain disruptions and higher commodity costs. Additionally, the retailer plans to open at least 25 net new units in FY22 to boost its sales.
Overall, Wall Street is optimistic on Costco stock, with an analyst rating consensus of Strong Buy, based on 16 Buys and 5 Holds.
Furthermore, Costco scores a 9 out of 10 from TipRanks’ Smart Score rating system, which suggests that the stock has strong potential to outperform market expectations.
TipRanks’ Stock Investors tool indicates that investors who hold portfolios on TipRanks have a Very Positive outlook on Costco stock, with 3.8% of these investors increasing their exposure in the last 30 days.
Meanwhile, the average Costco price target of $496.63 implies 9.9% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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