Issues about inflation and supply chain have cast a shadow on retail stocks. Even if prices are higher, Target TGT stock has dropped by 26.9% over the past month, and Walmart WMT shares are decreasing by 16%.
Those figures are indicative of macroeconomic concerns rather than the actual results posted by either company. Despite the fact that retail stocks have experienced a difficult season, with almost every major player trading at lower prices.
The reality is that current market conditions are beneficial to the largest retailers. Walmart and Target have leverage when it comes to the supply chain. Both chains experienced problems, both with too much inventory and not enough in certain cases, but these were mild issues due to the enormous purchasing power these organizations have.
Get Costco Wholesale Corporation Report has also seen its stock price decrease (increased 11% over the past 30 days) but this does not affect the company''s actual results, as it reported remarkable third-quarter figures.
Costco Wins on its Most-Important Numbers
Costco''s net income increased to $1.353 billion, or $3.04 per diluted share for the quarter, up from $1.22 billion or $2.75 per diluted share in the year-ago quarter. Net sales also increased by 16.3% to $51.61 billion, compared to $44.38 billion reported last year in Q3.
"In terms of comparable sales for the third quarter, for the 12 weeks on a reported basis, the United States was better or increased by 16.6%; Canada, by 15.2%; Other International, by 5.7%; and total company, again, increased by 14.9%," said senior vice president Bob Nelson during the Q3 earnings call.
Sales are a barometer of how friendly members are with the warehouse club when sales rise. This is a good sign, but membership retention and growth are the key points for the chain.
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"And the worldwide rate came in at 90% for the first time in business history at the end of Q3, and that''s up 0.4 percent from what we reported at the end of Q2.
Costco''s true business isn''t selling goods from its warehouses, it''s selling memberships. Even a slight increase in its already-high retention rates shows a thriving business.
"We surpassed our member base by 64.4 million paid households and 116.6 million cardholders at the end of Q3," Nelson said. "Executive members now represent over 74 percent of our worldwide revenue."
Why Should You Buy Costco Stock?
Costco''s business has been established to thrive in difficult economic times, and the warehouse club has been operating in a sort of perfect storm for its members. In a time when prices have increased, Costco''s members understand that while inflation and supply chain concerns may drive prices up, the warehouse club will keep prices affordable as quickly as possible.
Costco sells gas at many of its locations, generally at the lowest prices of any gas facility. This is a huge factor for membership sales in a context when gas prices have reached or reached new highs.
Costco has been built to help customers regardless of what the economic conditions are, but inflation (higher prices) should attract even more customers to the chain. After the warehouse club has acquired those members, it has done a fantastic job of keeping them on track.