Costco Wholesale continues to improve, delivering consistently strong same-store sales growth. Jefferies and Raymond James analysts argue that the company's business model will continue to drive compounding growth.
For the month of July, Costco (ticker: COST) reported an unadjusted 13.8% year-over-year increase in same-store sales. On an unadjusted basis, the company's Canada operations led the way, with growth of 16.5%. However, after excluding impacts from currencies and gasoline prices, the U.S. remained on top, posting year-over-year same-store sales growth of 8.5%, while the company as a whole reported adjusted growth of 8% in July.
Total same-store sales growth in July was comparable with June but still lags behind May's 14.7% increase in adjusted year-over-year sales growth.
Nonetheless, the retail giant's July numbers still topped consensus expectations for 4.5% in year-over-year adjusted growth. Additionally, they exceeded Jefferies analyst Stephanie Wissink 's forecast for 6% in adjusted growth, prompting her to increase her price target to $500 from $445 while maintaining her Buy rating in a Wednesday report.
In particular, Wissink was impressed by the company's ability to continue improving over previous benchmarks while retaining members acquired during the pandemic. She sees future benefits as members move through a "natural maturation curve." Wissink also reiterated that an increase in Covid-19 cases could bring more upside if "food at home" and other at-home spending trends grow.
Likewise, citing the strong sales numbers and Costco's competitive business model, Raymond James analyst Bobby Griffin reaffirmed his Outperform rating and increased his price target to $460 from $415 in a Wednesday report.
"Costco's consistent revenue growth across merchandise categories and solid store traffic (during a period of elevated ticket levels) reinforce the value Costco offers its members and our view that the membership model is arguably the most attractive business model in hardline retail today," Griffin wrote.
Costco stock closed up 1.9%, at $443.19, on Thursday, while the S&P 500 was up 0.6% and the Dow Jones Industrial Average was up 0.8%.