Costco Wholesale (COST) shares traded firmly higher Friday after the bulk discount retailer posted solid December sales figures that suggest solid spending demand over the key Christmas holiday period.
Costco said sales for the five weeks ending on January 5 were up 7% from last year to $23.8 billion, well ahead of the 5.3% pace recorded over the retail month of November and firmly ahead of Street forecasts of a 3.5% gain.
Comparable U.S. sales were up 3.6%, the biggest gain since June, while a pullback in gas prices kept average ticket size gains in check, rising only 1% from last year compared to the 7% to 8% growth rates recorded over the summer and early autumn months.
"This is the first major retailer to provide an indication of December results and the rebound versus November to better than expected comps endorses the theory that holiday sales came late in 2022 after a slow start in November," said D.A. Davidson analyst Michael Baker, who carries a 'neutral' rating with a $478 price target on the stock.
"Recall that a year ago, November was strong because consumers were concerned with out of stocks, and then December was weaker due to Omicron," he added. "Thus, the comparisons for holiday 2022 suggested a back ended loaded period and Costco’s results exhibit this. We see (these figures) as not only positive for Costco but for the near term retail outlook in general."
Costco shares were marked 6.5% higher in early afternoon trading Friday to change hands at $479.25 each, a move that would trim the stock's six-month decline to around 2.2%.
Last month, Costco posted weaker-than-expected first quarter earnings as membership revenues missed Street forecasts amid a pullback in discretionary sales over the final weeks of autumn.
Costco said diluted earnings for the three months ended Nov. 20, the company's fiscal first quarter, came in a $3.10 per share, 2 cents shy of the Street consensus forecast, as group sales rose 8.1% to $54.44 billion. Membership revenues were up 5.7% to $1 billion, just shy of forecast.
The group hinted at "when", rather than "if" it would raise its membership fees, pegged between $60 and $120 per year, but remained non-committal as to the timing.
