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Why Costco Stock Rose 11% in March

COST Chart

What happened

Shares of Costco Wholesale (NASDAQ: COST) were moving higher last month after the warehouse retailer turned in another strong quarterly earnings report, beating profit estimates and posting strong comparable-store sales growth. According to data from S&P Global Market Intelligence , the stock gained 11% in March.

As the chart below shows, the stock jumped on the earnings report and gained from there as optimism built.

COST data by YCharts.

So what

Costco shares rose 5% on March 8 following its second-quarter earnings report. The company showed off another round of impressive comparable-store sales as adjusted comps rose 6.7% and e-commerce sales jumped 26%. That drove overall revenue up 7.3% to $35.4 billion, which was a bit short of estimates at $35.7 billion.

The parking lot a Costco store

Image source: Costco.

Margins also improved as operating income was up 18.4% to $1.2 billion, and earnings per share jumped from $1.59 to $2.01, which was well ahead of estimates at $1.69. CFO Richard Galanti noted an improved selection of products online, including Apple iMacs and MacBooks, and said the company was expanding its supply chain with new meat and poultry processing plants, and a new bakery in Canada.

Now what

Costco doesn't provide guidance, but with the economy looking strong after the latest jobs report and a potential resolution to the U.S.-China trade war, the retailer is in good shape for continued gains. Costco recently announced that its little-known auto program saw a 25% increase in sales last year to 650,000, further evidence of the unique benefits that members get and the staying power of Costco's business model.

The company did say that adjusted comps were up just 4.3% in February and e-commerce sales increased 21.6%, but it blamed bad weather in North America and a shift in the lunar new year for that slowdown. Without those impacts, growth would have been similar to earlier in the year, the company said.

Nonetheless, Costco's growth plan remains on track as the company showed again why it's a best-in-class retailer.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Costco Wholesale. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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