Costco’s July sales report keeps us bullish
Key point inside this alert:
- Our price target remains $230 for Costco Wholesale (COST) shares, however, we will once again assessing incremental upside to be had based on the context to be found in the July Retail Sales Report.
Last night, Costco Wholesale (COST) served up its July sales figures that once again confirmed it continues to take consumer wallet share and open new warehouse locations. We see the month’s data as the latest thesis affirming data point for the company’s business and our position in the shares.
Digging into the particulars of Costco’s July data, net sales hit $10.59 an increase of just over 10% year over year. That brings the trailing three-month year over year increase in net sales to $35.16 billion, up just shy of 12% year over year. Impressive for sure, and the soon to be upon us July Retail Sales Report that will be published next week (Aug. 15) will more than likely once again confirm Costco’s consumer wallet share gains.
One of the keys for these overall revenue gains has been the targeted expansion of the company’s warehouse footprint, which stood at 757 locations exiting July vs. 749 this past April and 736 at the close of July 2017. Excluding the impact of those new openings, which will no doubt drive favorable membership fee income figures, profits and EPS, on a same-store-sales basis, Costco was up 8.3% company-wide (6.4% excluding gas and foreign exchange) in July. This tells us that the core Costco business continues to resonate with consumers, and we see that continuing as we head into the seasonally strong shopping season with Back to School, Halloween, Thanksgiving and the year-end holidays. E-commerce sales climbed more than 20% year over year for the month, which signals the company continues to make inroads as it continues to expand its digital offerings.
Quickly back to the July data for those keeping tabs, each of the company’s reportable segments rose year over year with the strongest gains in the US (up 6.6% excluding gas and foreign exchange) followed by Other International (up 7.1%) and Canada (up 5.0%).
- Our price target remains $230 for Costco Wholesale (COST) shares, however, we will once again assessing incremental upside to be had based on the context to be found in the July Retail Sales Report.
