Costco's March Comps Rise on Coronavirus-Led Panic Buying

Zacks Equity Research

As consumers stock up food and essentials items in the wake of coronavirus outbreak, Costco Wholesale Corporation’s COST overall sales shot up in the month of March. The company’s growth strategies, better price management, strong membership trends and increasing penetration of e-commerce business have been also supporting the performance. Cumulatively, these factors have helped the company in sustaining impressive comparable sales (comps) run.

The operator of membership warehouses highlighted that comps for the month of March — the five weeks ended April 5, 2020 — rose 9.6%, following an increase of 12.1% and 6.6% during the month of February and January, respectively. Notably, comps for March reflect an increase of 10.7% in the United States, 1.2% in Canada and 12.2% in Other International locations, respectively.

We note that excluding the impact of foreign currency fluctuations and changes in gasoline prices, comps for the month rose 12.3%, with 12.1%, 7.2% and 19.2% increase in the United States, Canada and Other International locations, respectively.

Meanwhile net sales improved 11.7% to $15.49 billion during the month under review, following a rise of 13.8% and 8% in February and January, respectively.



For the 31-week period ended Apr 5, Costco generated net sales of $96.25 billion, reflecting an increase of 9% from $88.29 billion reported in the year-ago period. Comps for the period improved 7.5%, while the same increased 8%, 5.4% and 7% in the United States, Canada and Other International locations, respectively.

Costco, which shares space with Walmart WMT, Amazon AMZN and Target TGT, has been adopting the omni-channel mantra to provide a seamless shopping experience online and in stores. The company operates e-commerce sites in the United States, Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia. We note that the company’s e-commerce comparable sales surged 48.3% in the month of March.

To drive its online sales, the company launched CostcoGrocery to deliver non-perishable items to buyer’s home, and expanded same day grocery delivery service in collaboration with Instacart. Recently, it acquired Innovel Solutions, a leading provider of third-party end-to-end logistics solutions. The buyout will boost Costco’s e-commerce capabilities and facilitate sales of "big and bulky" items.

All in All

Costco continues to be one of the dominant warehouse retailers based on the breadth and quality of merchandise offered. In fact, its strategy of selling products at heavily discounted prices has helped it to remain on growth track. Additionally, a differentiated product range enables the company to provide an upscale shopping experience for members.

Even amid such crisis Costco looks quite resilient owing to the company’s business model and products it offers, which have been in demand since the outbreak. Notably, shares of this Zacks Rank #2 (Buy) company have risen 3% in the past three months compared with the industry’s decline of 12%. In fact, the stock has fared far better than the Retail – Wholesale sector and the S&P 500 index that have fallen 10.4% and 18.3%, respectively, in the aforementioned period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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