Costco's 'Strong' March Comps Suggest Consumer Value Proposition Is 'Winning'

Costco Wholesale Corporation (NASDAQ: COST) reported Wednesday multiple sales metrics for the month of March which reinforced the case for owning the stock, according to Stifel.

The Analyst

Stifel's Mark Astrachan maintains a Buy rating on Costco with an unchanged $200 price target.

The Thesis

Costco said U.S. same-store sales rose 5.8 percent and its international business rose 6.7 percent. Both of the reported metrics were not only above consensus estimates, but marks an acceleration on a two-year basis, Astrachan said in a note. Moreover, traffic rose 4.5 percent in the U.S. and 4.3 percent internationally and e-commerce growth accelerated from 27.3 percent in the fiscal second quarter to 32.1 percent in March.

Astrachan said Costco's March report reaffirms the company's commitment to offering consumers value so an above-average comp growth rate should be sustainable for some time. The company continues to add new offerings in its digital and e-commerce platform, which is "on-trend" with what consumers want and "the right move" for long-term success.

Costco's ongoing momentum makes it clear it can "coexist" against competitors like Walmart Inc (NYSE: WMT) with minimal cannibalization from Amazon.com, Inc. (NASDAQ: AMZN), Astrachan wrote. However, Amazon's acquisition of Whole Foods does remain a "watchpoint" for the longer-term as it looks to build its food business and take share from multiple grocery players.

Price Action

Shares of Costco were trading higher by 2.5 percent at $189.49 Thursday afternoon.

Related Links:

Costco 'Has The Tools To Compete And Win': Analysts React To Retailer's Q2 Report

Stifel Remains A Costco Bull After In-Line Q2

Image Credit: Tony Webster from Minneapolis, Minnesota, CC BY-SA 2.0, via Wikimedia Commons