Costco's Colossal January Comps Keep It A Top Pick For 2017

Continuing to list Costco Wholesale Corporation (NASDAQ: COST) as a Top Pick, Baird’s Peter S. Benedict said, “January sales reinforce our view that COST can deliver improved top-line trends in CY17 as compares ease, deflation moderates, and steep declines in tobacco are cycled.”

The analyst reiterated an Outperform rating on the company, with a price target of $180.

Strong January Comps

Costco Wholesale reported comps of 7 percent for January, beating the estimate and the consensus, driven by stronger core trends.

“Looking ahead, prospects for continued underlying improvement appear good as deflation appears to be moderating and tobacco headwinds should start to fade this spring,” Benedict mentioned, while pointing to the company’s “emerging credit-card related P&L benefits and potential out-of-model catalysts.”

Core comps accelerated to 5 percent in January, from 3 percent in December, while the core comps in the United States saw continued momentum, against a backdrop of easing compares and slightly favorable weather year-on-year.

International Trends

Outside the United States, Costco Wholesale saw Canada local currency comps slowing from the December levels. Other international comps improved.

In addition, global traffic improved to more than 3 percent, with the U.S. trends being especially strong.

Core average ticket was also positive for the second successive month, with deflationary headwinds beginning to moderate.

In terms of regional trends, Benedict noted, “Strongest U.S. regions were Northeast, Texas, and Midwest. Korea, Mexico, and Taiwan posted the strongest comps internationally.”

At last check, shares of Costco were up 3.62 percent at $167.72.