Costco sales surge in August
The warehouse chain offers a better glimpse into the economy than other retailers.
Sales at stores opened at least a year, a key retail metric, surged 6% in August, beating the 4.5% increase that analysts had expected. Net sales were $7.4 billion for the month of August, up 8% year-over-year. Shares of the Issaquah, Wash. company rose on the news.
Post continues below.
Stores in the Midwest, Southeast and San Diego posted strong results, as did locations in Mexico, Canada and Taiwan, according to the company. A wide range of product categories did well ranging from frozen foods to small appliances to hardware. This is good news for a variety of reasons.
Unlike many other chains, Costco caters to both individual consumers, particularly those that are a part of large families, and small businesses. The company has about 10 million paid business members and 26 million gold star members, which tend to be individuals. As of the second quarter, membership renewal rates were about 89%. Given the large quantities people have to purchase, Costco customers have to be among the most confident of consumers.
Wall Street is underestimating Costco's potential for growth, especially since S&P recently announced that it might raise the company's debt rating. The average 52-week price target on the stock is $92.57, ahead where it recently traded. Investors may not be aware of the company's broad appeal. Costco appeals to budget-conscious consumers because its prices on some goods, such as fresh produce, are superior to traditional chains even considering the larger quantities that consumers need to buy.
Other retailers, such as Macy's (M) and Gap (GPS), reported better-than-expected sales, as shoppers were lured by back-to-school promotions. Retailers also may ramp up promotions early for the important holiday season.
Though past performance is no guarantee of future results, Costco should do fine in the coming months. Its strong results also bode well for the reelection of President Barack Obama, whose pathway to victory might be paved by pallets of paper towels and toilet paper.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
More from Top Stocks
- Right-leaning CNBC offers rare GOP criticism
- Ailing Sears dropped from S&P 500
- Americans loco for Taco Bell's Dorito snack
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The Fed may start tapering in just a few months. Here are a few of the likely winners and losers.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.