Costco’s Holiday Sales Surge Points to Robust Stock Rebound, Analyst Says

Costco Shares Climb After Impressive Sales Report

Costco Wholesale Corporation (NASDAQ: COST) saw its stock price rise on Thursday, fueled by robust monthly sales figures.

The company continues to demonstrate strong consumer demand in both its U.S. and international operations.

Analyst Endorsement and Price Target

JP Morgan analyst Christopher Horvers reaffirmed his positive outlook on Costco, maintaining an Overweight rating and setting a price target of $1,000.

According to Horvers, Costco is steadily increasing its market share across various product categories, with customer traffic showing consistent improvement.

He anticipates that comparable sales will accelerate, supported by easier year-over-year comparisons and the impact of stimulus spending, which could drive further valuation growth.

Business Model Strengths

Horvers highlighted that approximately 70% of Costco’s product mix consists of essential goods. The company’s ongoing global expansion and its recurring revenue model—bolstered by high membership renewal rates—are key advantages.

Membership fees account for about half of Costco’s operating profit, giving the retailer significant pricing power and flexibility with margins. Additionally, increasing profits from e-commerce and a rise in advertising revenue are expected to further enhance margins.

Recent Sales Performance

• U.S. core comparable sales jumped 6.3% in December, surpassing both internal and analyst expectations.
• Customer traffic in the U.S. grew by 2.4%, while overall company traffic increased by 2.7% year-over-year.
• The average transaction amount rose 3.4%, excluding the effects of lower gas prices and currency fluctuations.
• Canadian comparable sales were up 6.0%, aligning with forecasts, and international markets slightly outperformed expectations.
• Comparable sales excluding gas and currency impacts reached 6.9%, indicating strong demand.

Regional Highlights

Within the U.S., the Midwest, Northwest, and Southeast regions led performance. Internationally, Australia, Japan, and Korea were standout contributors.

Horvers noted that adverse weather affected demand in the Northeast during December, but the impact was less severe compared to competitors like BJ’s. He also observed that the negative effects of store overlap have lessened, dropping to 50 basis points from 60 in previous months.

Momentum and Outlook

December’s strong sales reinforced Horvers’ belief that Costco continues to outperform other retailers. The company’s impressive results in November and December suggest it once again dominated the holiday season, setting the stage for continued growth as year-over-year comparisons become more favorable.

He expects that as seasonal pressures ease, Costco will see further sales gains. Upcoming spring tax stimulus is also anticipated to boost demand even more.

Membership Growth and Benefits

Extended shopping hours for Executive members have led to increased visit frequency and spending. Executive membership sign-ups have climbed to 80,000 per week, up from 70,000 in the previous quarter. This growth has contributed to an approximate 5% increase in membership fee income for the quarter.

Stock Performance

Costco’s stock was up 5.05% at $927.11 as of Thursday, according to Benzinga Pro data.

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