stock is up 18.5% year to date, and a coming data set could indicate where it heads from here. The discounter’s August sales report, due out on Wednesday, will be another read on how consumers are behaving as stimulus checks wane, and a preview of its upcoming earnings report.
Costco (ticker: COST) is one of the few retailers that still provides monthly same-stores sales updates (a practice made possible by its membership fee, which allows for greater visibility than peers). Yet many other retailers have informally begun doing this in recent months, to demonstrate how they’ve been faring during the pandemic—showing how quickly shoppers returned to reopened stores or how demand has been faring since the panic buying of this spring.
While no one expects essential retailers to put up the huge gains they saw in March, on the initial wave of pantry stocking as the first Covid-19 lockdowns went into effect, the question is how dramatic that drop off will be: A slower decline may show that a retailer is retaining new customers or increasing loyalty among existing ones, even as other options open up. Therefore, many retailers are breaking out monthly sales in a way they might not otherwise.
It’s a tactic that can either help or hurt a stock.
(WMT) for example, had a great quarter, but noted that same-store sales rose just 4% in July—a noticeable deceleration from earlier in the period that it blamed on dwindling government stimulus—and the shares fell.
(TGT) comparable sales held up better, as did its stock. Discounter
(DG) provided upbeat commentary about its August sales trajectory, which helped its stock, while
(DLTR) did not, and its shares fell post-earnings.
Costco itself dropped on flat April same-store sales, as investors worried that shoppers were pulling back after March buying sprees. Yet May sales rebounded, and a strong showing in June sales helped reassure investors that consumers were still flocking to its stores. Last month’s sales were similarly robust.
Costco can’t defy gravity forever, but with the big, essential retailers getting bigger and gaining more market share, many are expecting another strong month.
Gordon Haskett analyst Chuck Grom reiterated a Buy rating on Costco on Monday, and raised his price target by $30 to $380 ahead of the report. He’s expecting core same-store sales (which excludes swings from gasoline prices and foreign exchange) to be up 13.5% in August. His optimism stems from strong foot-traffic trends (as tracked by Placer.ai), visits to Costco.com, favorable consumer responses to his own research about Costco, and upbeat data from peers like Walmart’s Sam’s Club and
BJ’s Wholesale Club
Likewise, Guggenheim’s John Heinbockel has a Neutral rating on the shares (based on the stock’s valuation) but also expects same-store sales to be up between 12% and 13% for August. He thinks analyst estimates for the quarter as a whole will also move higher after the report.
Costco will release full fiscal fourth-quarter results on Sept. 24, although the company will disclose sales and comparable sales for the quarter in Wednesday’s report.
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