Costco Wholesale Corporation
) witnessed sales slowdown in July as the company delivered
comparable-store sales (comps) growth of 4%, following an
increase of 6% in June, and missed analysts' expectations. Comps
increased 4% at both the U.S. and international locations.
On the whole, July sales were soft for most retailers as weak
traffic played spoilsport. Discount store operator,
), witnessed a 2.5% rise in comps, while the clothing chain,
The Gap, Inc
), witnessed a 1% increase. However, specialty retailer,
The Cato Corporation
), witnessed a 5% decline in comps.
Coming back to Costco, comparable-store sales for the 48-week
period ended Aug 4, 2013 rose 6%, buoyed by an equivalent
increase at both the U.S. and international locations.
Excluding the effect of gasoline prices and foreign currency
fluctuations, Costco's comparable-store sales for July rose 5%,
reflecting comparable sales growth of 3% at its U.S. locations
and 8% at international outlets. For the 48-week period,
the company witnessed comparable-store sales growth of 6%, with
U.S. and international sales rising by a similar rate.
Total net sales for July rose 7% to $7.87 billion from $7.36
billion in the year-ago period. Costco's net sales for the
48-week period increased 8% to $94.91 billion from $87.72 billion
in the year-ago period.
Going forward, with high inventory levels for the key
back-to-school season, retailers will have to spend more on
promotions and come up with value pricing to make the most of the
second-best shopping season after the winter holidays. However,
discounts and hot deals could eat away margins.
As for Costco, we believe its differentiated product range
enables it to provide an upscale shopping experience to its
members, resulting in market share gains and higher sales per
square foot. Moreover, it continues to maintain a healthy
membership renewal rate, which is encouraging.
The company remains committed to opening new clubs in domestic
and international markets. The company's diversification strategy
is a natural hedge against risks that may arise in specific
Currently, Costco holds a Zacks Rank #3 (Hold).
CATO CORP A (CATO): Get Free Report
COSTCO WHOLE CP (COST): Free Stock Analysis
FREDS INC (FRED): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
To read this article on Zacks.com click here.