The Holidays Were Certainly Happy For Costco

Jan. 12, 2020 12:58 PM ETCostco Wholesale Corporation (COST)26 Comments15 Likes
Lukas Wolgram profile picture
Lukas Wolgram
4.11K Followers

Summary

  • Costco comparable sales metrics were impressive in December.
  • The company continues to execute with strong business performance.
  • The 1-year trendline was briefly violated, before being reclaimed after Costco revealed December sales.
  • Costco remains one of the best retailers period.

Costco Impresses With December Comparable Sales

Costco (NASDAQ:COST), one of my favorite large caps, issued a new release revealing December 2019 sales on January 8, 2020. The results were nothing short of stellar.

Source: Costco Investor Relations News Release

The company reported a comparable sales increase of 8.4% in the U.S., and 6.0% in Canada after impacts from gasoline and foreign exchange. International (excluding Canada) same store sales increased 5.9%, resulting in a total company comparable sales increase of 7.8%. While this is impressive, e-commerce is the real story here. Comparable e-commerce sales increased by approximately 43% for the five weeks ended January 5, 2020.

While impressive, readers should note that this 5-week stretch included the Sunday of Black Friday weekend as well as Cyber Monday. These days did not fall in this 5-week period from 1 year ago, thus the numbers are somewhat skewed.

Fortunately, Costco is giving solid disclosure here, revealing that e-commerce sales were impacted by 20 percentage points due to the calendar, and total comparable sales were impacted by just 1%.

Still, making the appropriate adjustments reveals rather impressive results. High single-digit percentage increases in total sales, and mid 20 percentages for e-commerce illustrate that Costco continues to execute and remains at the top of the retail food chain.

A Trendline To Continue Watching

In my previous article on Costco, The Trendline To Watch On Costco, I pointed out the trendline that Costco's share price had held since late 2018. This trendline was recently broken but was reclaimed with the December sales news release. I think investors should continue to monitor this trendline going forward, but the fact that it was broken briefly may reduce its effect on price in the future.

Source: Thinkorswim

Conclusion

Costco continues to be one of the best companies in retail. The company posted strong holiday sales and is seeing strong momentum in e-commerce into 2020. While shares are expensive by most measurements and ratios, I continue to think shares will outperform savings accounts at the least, and continue to put up solid double-digit percentage returns at best over the medium to long term.

I'll be writing more articles on Costco in the future, as well as other great (or sometimes not so great) stocks. So be sure to follow me and turn on email notifications to ensure you never miss another one of my articles! I try to help all my readers find interesting opportunities in the market. Consider checking out some of the other articles I've written as well, which often do a deep dive into a company's fundamentals or take a look at their most recent earnings or news releases.

This article was written by

Lukas Wolgram profile picture
4.11K Followers
Check out my FREE and PAID substack newsletter Uncommon Profits here: https://lukewolgram.substack.com .      I discuss 1-2 well-researched investment ideas every month as well as updates on my core holdings for subscribers. Ranked #1 on Tip Ranks top 25 financial bloggers for accuracy as of January 1, 2021. Currently ranked #20 overall financial blogger as of June 1, 2021. I focus mostly on small and microcaps, as well as tech stocks and a few other great businesses.
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Disclosure: I am/we are long COST. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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