Costco Wholesale Bullish Engulfing on Q4 Beats

Costco Wholesale COST stock formed a bullish engulfing candlestick pattern on September 27, 2023, after the company reported EPS and revenue beats.

Costco reported Q4 EPS of $4.86 versus the consensus estimate of $4.79. The company reported Q4 revenue of $78.94B versus the consensus estimate of $77.9B. Costco reported Q4 comparable sales up 1.1%. Reports Q4 adjusted comparable sales up 3.8%.

After missing sales estimates in each of the past three quarters, Costco (COST) beat top expectations in Q4 2023 with store traffic up +5.2%, membership growth of 7%, and improving demand for big-ticket items. Overall, these factors helped accelerate COST total revenue growth to 9.5% from just 2% in the previous quarter, while allowing the company to beat EPS estimates.

Store traffic can be measured using various methods, including:

1. Manual Counting: This involves physically counting the number of people entering or exiting the store using a tally counter or handheld device.

2. Footfall Sensors: Electronic sensors placed at store entrances or exits can detect and count individuals as they enter or leave.

3. Video Analytics: Advanced video surveillance systems can analyze footage to count the number of people entering or exiting the store.

4. WiFi Tracking: By tracking WiFi signals emitted by mobile devices, retailers can estimate the number of people present in the store at a given time.

5. Beacons: Small Bluetooth devices placed within the store can be used to track the movement and density of customers within specific areas.

6. People Counting Apps: Retailers may use smartphone applications that utilize the device’s camera and image recognition technology to count the number of people entering or exiting.

7. Transaction Data: Store traffic can also be estimated by analyzing the number of transactions recorded at the point of sale (POS) system.

8. Heat Mapping: Heat mapping technology uses sensors or cameras to track customer movement within the store, providing insights into busy areas and popular sections.

Each method has its own advantages and limitations, and retailers often use a combination of these techniques to get a comprehensive understanding of store traffic.

Being that the last price increase was more than six years ago, it was somewhat disappointing that COST decided not to increase its membership dues once more. Because of the high rate of inflation, COST has refrained from raising membership fees because it didn’t want to make its customers’ problems worse. Some market participants were expecting COST to announce the membership fee increase last night because inflation has decreased compared to last year. Although that didn’t happen, CFO Richard Galanti did say that increasing fees is a matter of when, not if.

As of September 2021, the annual membership dues for Costco are as follows:

1. Gold Star Membership: $60 per year

2. Gold Star Executive Membership: $120 per year

The Gold Star Executive Membership offers additional benefits such as an annual 2% reward on eligible Costco purchases (up to $1,000), additional discounts and benefits on Costco services, and access to exclusive Costco travel packages.

Keep in mind that these membership fees may vary depending on the location and any ongoing promotions. It’s always recommended to check with your local Costco warehouse for the most accurate and up-to-date information.

COST had a strong quarter overall, which was an improvement over its previous quarters. Consumers are still thronging to the company’s stores to find value in buying items in bulk, as evidenced by the membership growth and renewal rate of the company, which both stand at 92.7%. Though the lack of a membership fee increase is initially disappointing, the fact that COST still has that card to play ought to help the stock going forward.

Costco price target raised at JPMorgan

Following the release of the fiscal Q4 report on September 27, 2023, JPMorgan analyst Christopher Horvers maintained an Overweight rating on the shares of Costco and raised the price target to $571 from $525. According to the analyst’s research note to investors, the increase in core-on-core gross marginGross margin is a critical financial metric that plays a pivotal role in evaluating a company's financial health and profitability. It is a percentage that indicates how efficientl... More was primarily caused by lagging markdowns in non-food categories from a year ago. Given its defensiveness, higher-income consumer base, and ongoing share gains, the company claims that now is a good time to own Costco. According to JPMorgan, the stock is extremely well-positioned in the current market, where consumers are actively seeking out the company’s best-in-retail prices due to rising economic pressures and high gas prices.

Costco price target raised at Deutsche Bank

On September 27, 2023, Deutsche Bank maintained a Buy rating on the stock while increasing its price target for Costco to $652 from $651. Few things about Costco’s fiscal Q4 results could be criticized because they combined to produce an earnings beat thanks to its best-in-class traffic, strong retail margins, sequential core-on-core margin improvement, and interest income, the analyst tells investors in a research note. Deutsche Bank said that because customers continue to place a premium on value, the business is in a strong position to gain market share during the holiday season.

Costco currently operates 861 warehouses, including 591 in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand and Sweden. Costco also operates e-commerce sites in the U.S., Canada, the U.K., Mexico, Korea, Taiwan, Japan and Australia.