Costco Beats 1Q Profit As Online Sales Jump 86%; Street Firmly Bullish

Costco posted better-than-expected earnings in the first quarter of fiscal 2021 (ended Nov. 22) as the retail giant continues to experience strong demand for groceries and household essentials amid the COVID-19 pandemic.

The company’s 1Q revenue grew 16.7% year-over-year to $43.2 billion and came ahead of analysts’ forecast of $42.3 billion. Costco’s (COST) net sales were up 16.9% to $42.4 billion while membership fees increased 7% to $861 million. Comparable sales growth came in at 15.4%. E-commerce sales surged 86.4% as online purchases continued to be robust amid the current health crisis.

The retailer reported strong sales in core categories like food and sundries, hardlines, softlines, fresh food and pharmacy. Meanwhile, it experienced softer sales trends in ancillary and travel businesses.

Costco’s 1Q EPS grew about 38% to $2.62 driven by higher sales and improved operating margin. Excluding one-time items, the company’s adjusted EPS of $2.29 exceeded analysts’ expectations of $2.04. (See COST stock analysis on TipRanks)

Following the print, Oppenheimer analyst Rupesh Parikh reiterated a Buy rating on the stock with a price target of $400. The analyst noted that Costco exceeded estimates despite “very generous hazard pay.”

“Looking forward, we believe COST remains best positioned to retain share gains in key categories from food to home-related categories such as appliances and furniture coming out of the pandemic. COST remains a top pick for us, and we would take advantage of a likely volatile trade in coming quarters as the company laps more difficult compares,” Parikh added.

Currently, Costco scores a Strong Buy analyst consensus based on 15 Buys and 4 Holds. With shares rising 30.1% year-to-date, the average price target of $393.56 indicates upside potential of 5.6% from current levels.  

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