Shares of Costco Wholesale Corporation COST fell roughly 4% despite the company’s better-than-expected comparable-store sales (comps) results for the month of December reported on Jan 6, 2016. So, what went wrong with this warehouse retailer? Let’s find out.
Costco witnessed comps growth of 1%, following flat comps in November and a decline of 1% in October. Comps for December reflect an increase of 3% at the company’s U.S. locations, offset by a decline of 9% and 3% at its Canadian and other international locations, respectively.
However, excluding the effect of deflation in gasoline prices and the adverse impact of foreign currency fluctuations, Costco’s comps for the month under review rose 5%, but came in below analysts’ expectations. This made investors cautious on the stock, leading shares to decline 4% since the announcement of the results.
The company recorded comparable sales growth of 4%, 9% and 5% across its U.S., Canadian and international outlets, respectively.
Costco reported flat comps for the 18-week period ended Jan 3, 2016, incorporating a 3% increase across its U.S. locations, offset by a 9% decline at its Canadian locations and a 4% drop at the international locations. Excluding the effect of gasoline prices and foreign currency fluctuations, comps for the period jumped 6%, reflecting an improvement of 6%, 9% and 6% at the U.S., Canadian and international locations, respectively.
On the sales front, this Zacks Rank #3 (Hold) company reported a 3% jump in net sales to $12.45 billion for the five-week period ended Jan 3, 2016. For the 18-week period, net sales came in at $41.66 billion, reflecting a 2% rise from $40.86 billion generated in the year-ago period.
Costco, which competes with Wal-Mart Stores Inc. WMT, currently operates 698 warehouses, which include 488 in the U.S. and Puerto Rico, 90 in Canada, 36 in Mexico, 27 in the U.K., 24 in Japan, 12 in Korea, 11 in Taiwan, 8 in Australia, and 2 in Spain.
Stocks to Consider
Better-ranked retail stocks that appear promising include Ross Stores Inc. ROST and The Kroger Co. KR,both carrying a Zacks Rank #2 (Buy).
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