Costco Wholesale Corporation (Nasdaq: COST) made new all-time highs on this week after the company reported impressive same-store sales growth in May. Analysts say Costco’s strong performance so far in 2018 is an indication that the company can hold its own against fierce competition from Walmart ( WMT) and Amazon.com ( AMZN).
After reporting first-quarter same-store sales growth of 7 percent earlier this month, Costco says same-store sales increased 11.7 percent in May. Costco excludes the impacts of foreign currency exchange and gasoline price fluctuations in its numbers.
May U.S. same-store sales were up 11.7 percent, Canadian sales were up 13 percent and other international sales were up 9.4 percent.
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In addition, Costco reported May online sales growth of 34.4 percent, down slightly from the 36.8 percent growth the company reported in the first quarter.
After COST stock briefly dipped on margin concerns following its earnings report, May sales numbers now have it trading at all-time highs above $200 per share. Analysts say Costco is one of the few U.S. retailers that is having no problem fending off the competition.
“We believe current trends remain solid and we also think the results indicate Costco can coexist with large hardline competitors like Walmart and have limited cannibalization from Amazon,” Stifel analyst Mark Astrachan says, according to MarketWatch.
Astrachan says the May numbers offer further proof that Costco’s focus on value is winning over new customers. However, he says long-term investors should keep an eye on just how aggressive Amazon plans to be with its Whole Foods price cuts.
Bank of America analyst Robert Ohmes says Costco is well-positioned to benefit from a demographic shift in U.S. consumers over the next five to 10 years that should create a tailwind for discount retailers.
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“[Twenty-plus] new clubs per year, solid customer traffic growth, and steady membership renewal rates should continue, in our view, and the outlook for comps ex-fuel and FX is solid,” Ohmes says. “Internationally, solid growth prospects and an outlook for continued same-store sales growth support COST’s premium valuation.”
Even at all-time highs, analysts see additional upside potential for Costco stock.
Stifel has a “buy” rating and $210 price target for Cosco. Bank of America has a “buy” rating and $230 target for COST stock.
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Costco Wholesale Corporation (COST) Stock At New Highs originally appeared on usnews.com
