Costco slides after June sales fail to inspire; analysts are still upbeat
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Costco (NASDAQ:COST) dropped 1.3% on Friday after June comparable sales slid, but analysts are upbeat.
Total company comparable sales for June slipped 1.4%, while net sales rose 0.4% to $22.86B from $22.78B a year ago. Excluding the impact of gasoline prices and foreign exchange, total company comparable sales rose 3%.
Nonetheless, Oppenheimer said it continues "to look favorably upon COST" and recently re-added shares as a top pick thanks to a membership fee increase and a special dividend.
The firm points out that U.S. adjusted comps outside of gas and considering one less shopping day were up 2.5% in June with sales growth in food and sundries, fresh foods and non-foods. Inflation is also easing with the company saying price increases in food and sundries was lower than in May and continues to drop.
Telsey was similarly positive, bumping its price target on COST to $575 from $540 and maintaining an Outperform on the stock.
"Costco's better than anticipated June comp reflects good execution and its value appeal to a cost-conscious consumer," Telsey said. The firm "expects Costco to remain a share gainer, with its value-focused merchandising and high member loyalty (~125MM members)."
Evercore ISI noted that traffic growth remains "the key positive, up 3.6% in the U.S.," but bigger ticket items remain "somewhat softer."
"COST remains a core holding for share gain, traffic trends, and potential EBITDA boost from a likely fee increase," Evercore analysts wrote in a note. "We find Costcoâs defensive growth appealing with a special dividend and fee increase kicker providing two company-specific catalysts on a late this year/early next timing."
Still, analysts appear to be split on upcoming results with EPS revisions getting 10 downgrades and 10 upgrades over the past three months. Of 37 Wall Street analysts covering the stock, 26 have a Buy or Strong Buy rating on COST, 10 say Hold and just one says Sell.
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