Costco (COST) Likely To Emerge As A Strong Player In 2018

Costco Wholesale Corporation (NASDAQ:COST) seems somewhat unfazed by tough retail scenario. While major chains are grappling with sluggish store and mall traffic as consumers switch to online shopping, this Issaquah, WA-based company seems somewhat resilient to the challenging retail backdrop.

Shares of this Zacks Rank #3 (Hold) are hovering close to its 52-week high of $195.35, and there is no doubt why Costco could not breach that mark in the near term. In a year, the stock has increased 18.5% in line with the industry.

We believe that the company’s growth strategies, sturdy comparable-store sales (comps) performance, strong membership trends and higher penetration of Citi Visa co-brand card program are the pillars that reinforce its position. Moreover, analysts believe that Costco is likely to gain from Wal-Mart’s (NYSE:WMT) latest decision to shut 63 of 660 Sam’s Club outlets in the United States over the next few weeks.

Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of merchandise offered. In fact, the company’s strategy to sell products at heavily discounted prices has helped it to remain on growth track. The company has one of the highest square footage growth in the industry and remains committed toward opening new clubs in domestic and international markets.

Additionally, a differentiated product range enables Costco to provide an upscale shopping experience for its members, consequently resulting in market share gains and higher sales per square foot. It is also gradually expanding e-commerce capabilities in the United States, Canada, UK, Mexico, Korea and Taiwan. Consequently, comparable e-commerce sales for December surged 33.3%.

Costco continued with positive comps performance driven by improved store traffic and average transaction size. Comps for December increased 11.5%, following an increase of 10.8% in November, 7.5% in October and 8.9% in September. Notably, net sales increased 14.3%, 13.2%, 10.1% and 12.1% in December, November, October and September, respectively.

From above its quite apparent that Costco’s sound fundamentals placed the stock well in 2018.

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