On Thursday, Citi reiterated its Neutral rating on Costco Wholesale (NASDAQ:COST), with a consistent price target of $800.00. The company's September comparable sales showed a significant increase of 8.9% compared to 7.1% in August. Management attributed approximately 1.5% (2% in the U.S.) of this growth to the impact of Hurricane Helene and preemptive bulk purchases made by consumers in anticipation of the east coast port strike.
Despite most products being unaffected by potential port disruptions, Costco believes that some of the sales uptick related to the port strike might be reversed in the near future.
Management also noted that Costco may have gained additional foot traffic as customers turned to warehouse clubs over traditional grocery stores for stocking up on supplies. This behavior was observed amid concerns about the port strike. Furthermore, non-food categories experienced robust growth, particularly in jewelry, including gold bullion, gift cards, and home furnishings, which all saw low-teen percentage increases.
Costco's performance has been strong, even when factoring out the sales influenced by the port strike anticipation. Citi's analysis suggests that Costco is in a good position to handle the current market conditions. However, with the stock trading at approximately 31 times forward fiscal year 2025 EBITDA, Citi views the risk/reward profile for Costco's stock as balanced, indicating no change in their investment stance.
In other recent news, Costco Wholesale Corporation (NASDAQ:COST) has reported a significant 9% increase in its net sales for September, reaching $24.62 billion. The company's comparable sales figures showed varied growth across different regions, with a notable 22.9% surge in e-commerce. The company's recent Fourth Quarter 2024 Earnings Call revealed a 9% increase in net income to $2.354 billion and a 1% rise in net sales to $78.2 billion. E-commerce sales saw an impressive 18.9% increase.
In response to the ongoing dockworker strike at East Coast and Gulf Coast ports, Costco has taken proactive measures such as pre-shipping holiday merchandise and is prepared to switch to alternative ports if necessary. Analysts from TD Cowen, Evercore ISI, and BofA Securities have shown confidence in Costco's ability to navigate these challenges.
TD Cowen revised its price target upward to $975, retaining a Buy rating on the stock. Evercore ISI affirmed its Outperform rating, maintaining a price target of $985.00, while BofA Securities increased its price target to $972.
InvestingPro Insights
Costco's robust performance, as highlighted in the article, is further supported by InvestingPro data. The company's revenue for the last twelve months as of Q4 2024 stands at an impressive $254.45 billion, with a revenue growth of 5.02% over the same period. This aligns with the strong comparable sales growth mentioned in the article.
InvestingPro Tips reveal that Costco is a "Prominent player in the Consumer Staples Distribution & Retail industry," which is evident from its market performance and consumer behavior during potential supply disruptions. The company's ability to attract additional foot traffic during uncertain times, as noted in the article, is a testament to its strong market position.
Another relevant InvestingPro Tip indicates that Costco "Has maintained dividend payments for 21 consecutive years," showcasing the company's financial stability and commitment to shareholder returns. This consistency may be particularly appealing to investors in the current economic climate.
It's worth noting that InvestingPro offers 15 additional tips for Costco, providing a more comprehensive analysis for investors seeking deeper insights into the company's financial health and market position.
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