Costco Is Credit Suisse's Top 2016 Pick In Retail

Credit Suisse recently issued its 2016 Outlook, naming Costco Wholesale Corporation (NASDAQ: COST) as top stock in the retail industry.

Michael Exstein and Anjani Vedula, analysts at Credit Suisse, wrote, "With its singular focus on its one format anchored by its membership model, COST continues to be one of our few Outperform-rated stocks. We think that COST is the least vulnerable to secular issues impacting most retailers such as the tighter labor market, subscriptions, e-commerce, and the decline in the credit tailwind.

"While COST may not hit your classic 'value' screen in terms of P/E or EV/EBITDA, we think these shares are 'cheap' when considering they can grow earnings at a 10 percent or better rate while paying both quarterly and one time dividends."

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The analysts gave two key takeaways on why they see strength in Costco in 2016:

• 1. Employee Benefits: Credit Suisse wrote that Costco pays its employees some of the highest wages in retail. This has allowed for low employee turnover and increasing productivity as workers become highly skilled at their jobs.
• 2. Subscription Growth: Costco has seen its subscription growth rate increase in recent quarters due to consumer demand for their high quality and high-value items. Credit Suisse believes that the constant stream of revenue from subscriptions has allowed Costco to create a unique advantage in the ultra-competitive food and retail marketplace.

At the time of this writing, Costo was trading slightly down on the day by 0.43 percent at $150.46.

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