Costco’s December Sales Slowdown But Beat Estimates; Street Stays Bullish

Warehouse giant Costco reported a 10.7% rise in its December comparable sales, while overall sales grew 12.3% year-over-year to $19.1 billion.

Costco’s (COST) December comparable sales exceeded analysts’ consensus estimate of 9.5%, but the figure reflected a slowdown compared to comps growth of 13.4% and 14.4% in November and October, respectively. Looking at the regionwise growth, Costco’s comparable sales in the US, Canada and other international markets were up 9.6%, 8% and 19.4%, respectively. E-commerce comps rose 62.5% in December.  

Costco has been experiencing strong trends in groceries and items like furniture and mattresses as people are spending more time at home to prevent the spread of COVID-19. Last month, Costco reported better-than-expected results for the first quarter of fiscal 2021 (ended Nov. 22), with revenue rising about 17% to $43.2 billion and EPS increasing 38% to $2.62. (See COST stock analysis on TipRanks)

Following the December sales report, Robert W. Baird analyst Peter Benedict maintained a Buy rating on Costco and a price target of $410. The analyst noted that while December core comps marked the 7th consecutive month of double-digit growth, it was a deceleration from November.

The 5-star analyst stated that softer traffic was the main reason for the slowdown, along with less robust growth in food and sundries amid smaller holiday gatherings. That said, Benedict remains positive on Costco’s loyal membership base and structural cost advantages.

Overall, 16 Buys and 4 Holds add up to a Strong Buy analyst consensus on Costco. Shares have risen 26.8% over the past year. The average price target of $404.11 indicates further upside potential of 9.2% from current levels.

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