Costco (NASDAQ: COST), a warehouse club operator, has seen its stock price increase by 8% so far this year, reaching around $716 per share. The company has consistently driven revenue growth and focused on enhancing customer experience, leading to its success in the retail industry. Costco has continued to expand by opening new club stores in the U.S. and is poised for further growth internationally, particularly in China. In Q2’24, Costco repurchased 240k shares for $160 million and paid out a $15 per share special dividend in January 2024. Additionally, the company increased its recurring quarterly dividend by 13% to $1.16 per share.
Despite experiencing strong gains of 90% over the past three years, with its stock price rising from $375 in early January 2021 to around $715 currently, Costco has had inconsistent returns. The company saw returns of 51% in 2021, -20% in 2022, and 45% in 2023, underperforming the S&P 500 in 2022. However, in its most recent Q2, Costco reported revenue growth of 6% year-over-year to $57 billion, driven by a 4.8% increase in comparable sales and a 28% growth in eCommerce. Costco generates a majority of its profits from membership fees, with membership fee income increasing by 8% in the second quarter. The retailer is likely to raise its membership fees this year, which will contribute to its revenue growth.
Costco’s net income for the second quarter was $1.7 billion, or $3.92 per share, compared to $1.5 billion, or $3.30 per share, in the prior-year period. The company also has nearly $10.3 billion in cash and short-term investments and a net cash position on its balance sheet. Analysts have revised Costco’s valuation to $726 per share, with projected revenues of around $254 billion for fiscal year 2024, up 5% year-over-year. The stock’s current valuation at 47 times earnings is higher than pre-pandemic levels, which could lead to potential scenarios of decline or oscillation as earnings grow and valuations adjust.
Costco stands to benefit from high inflationary pressures on food as cost savings are passed on to consumers. The company reported net sales of $23.5 billion for the retail month of March, a 9.4% increase from the previous year. Costco also began selling gold and silver, offering attractive prices for members and cash back rewards. It is important to compare Costco with its peers to gain a better understanding of the retail industry landscape. Overall, Costco’s strong performance, focus on customer experience, and potential for international growth position it well for continued success in the ever-changing retail environment.
