How Costco is clobbering Wal-Mart and Target
The warehouse retailer's latest quarterly earnings exceed estimates as same-store sales jump 5%. Its big-box competitors can't say the same.
Shares of Costco Wholesale (COST) rose Tuesday after the warehouse retailer posted better-than-expected quarterly earnings at a time when rivals Wal-Mart (WMT) and Target (TGT) continue to stagnate.Net income at the Issaquah, Wash., company rose 39% to $547 million, or $1.24 per share, versus $394 million, or 90 cents per share, a year earlier. Sales increased, and the company had a tax benefit from a dividend it paid to its 401k plan. Revenue surged 8% to $24.34 billion. Analysts surveyed by Thomson Reuters expected a profit of $1.06 per share on revenue of $25.03 billion.
Excluding gasoline sales, Costco reported that same-store sales gained 5%. This key metric of sales at stores open for at least a year beat the most recent quarterly performance of Wal-Mart's U.S. locations and Target stores. The former rose 1.2%, while the latter managed just an uptick of 0.4%, Bloomberg News noted. Costco continues to attract new customers, as evidenced by the 15% gain in membership revenue.
Several factors account for Costco's strong performance. First, it delivers value for its members. For instance, prices for perishable products such as fruit are much better at Costco than at traditional supermarkets. Costco also offers a mind-blowing array of services such as travel deals, assistance in purchasing cars and, yes, even caskets. The company's Kirkland private-label products also are rarely disappointing.
Costco attracts individual consumers along with small businesses, such as mom-and-pop restaurants, looking for supplies. And it's not just for folks on a budget. People feeling flush with cash go to Costco to buy jewelry and electronics such as big-screen TVs and computers. The chain has something for everyone.
Costco plans to open 14 new locations prior to the end of its fiscal year on Sept. 1. Of course, it's not immune to the challenges facing other retailers, such as rising merchandise costs -- which surged 8% in the last quarter to $21.8 billion.
Jonathan Berr doesn't own shares of the listed stocks. Follow him on Twitter @jdberr.
This is the best box store,EVER...Their employees are paid a livable wage..That other box store Wally World, has over-saturated this country for so many years is now feeling the downward spiral of paying employees slave wages versus COSTCO, who cares about their employees and customers,and if you have the money,they have anything you need or want...
the 5% increase in same store income may also be due to the fact that many of the products have seen a double digit percentage increase in prices and in some cases a 100% increase.
I have been tracking the prices of the essentials that have been purchaing at Costco for over 12 years now and have recently started to notice a random increase in prices on the same product.
The Kirkland brand is comparable and in most cases bests the brandname products; but I am now noticing that the pricing between brandname products and Kirkland Products are almost the same and in some cases the brand names may be available at a lesser price due to a coupon.
Talking of Coupons... A few years ago when Costco sent us the coupon books, we had to clip the coupons to get the discounts; then costco started a practice of scaning just one coupon and other coupons were automatically applied; later they implemented a policy of just sending coupons but not requiring it with discounts applied automatically. This month when I received my coupon book, I noticed that the first few pages had coupons that required no clipping; and the remaining coupons had to be presented to get the discounts.
Costco traditionally was know for its employee work ethic, service and smiling employees; now a days they seem to be over worked, grumpy and not willing to help. Even their displays are useless; they display really great cameras that don't work so you have to buy it first, take it home to try it and then come back to the warehouse to return because there is no way to play with it before you buy; of course you can ask an employee who will shrug and will say "Sorry" before you can complete your sentence.
Of course- I still go to costco but I have been buying lesser every month for the last couple of years; but I have been finding random good deals closer to home at the "Big Box stores" and the friendly Internet stores and Amazon.
I no longer trust the pricing at Costco; I do my research before I buy.
Soon Costco's members will notice this and it will have to compete for business.
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