Costco continues to deliver solid results in spite of intense e-commerce competition.
Costco’s stock is up 22% this year and last week, it hit a 52-week high of $251 per share. The company’s earnings have been solid in spite of recent stock market volatility. In fact, the company’s business has been largely immune to the trade war.
The company released a strong earnings report in March and this week it will release its fiscal third-quarter earnings report. Investors are expecting earnings to rise by more than 7% to $1.83 per share.
Things to like about Costco
There’s been a huge shift in the retail industry as consumers no longer have to rely on traditional brick-and-mortar stores every time they need something. Many businesses haven’t been able to keep up but Costco is one of the exceptions.
Even in the age of Amazon, Costco is still able to bring customers into its stores week after week. The company relies on its yearly subscription-based membership and bulk bargain items to draw in new customers.
The company also offers free two-day shipping on orders of $75 or more. And the company partnered with Instacart to offer same-day delivery service to most areas in the U.S. But Costco’s biggest advantage is probably its strong base of loyal customers who continue to renew their memberships year after year.
And Costco has proven to be an investor-friendly company and is one of the few retailers that provide monthly sales releases. At times, this has been to the company’s detriment, like when it reported disappointing results in January.
Conclusion
It’s always hard to tell how investors will feel about an earnings report, even if the numbers are mostly positive. This is because the reaction is less about the earnings itself and more about how investors perceive those earnings.
A company can show strong earnings but if investors don’t believe they are sustainable or if the company is growing at a slower pace than in previous years, it won’t bode well for that company. On Thursday, investors will be looking for Costco to show that it has a plan to continue drawing new customers into its stores.
It’s impossible to know whether Costco will meet investor expectations but it’s likely the company will show solid earnings. And the company will likely continue to deliver thanks to its emerging digital presence, strong customer loyalty, and strong value proposition.
