What to Expect From Costco Earnings

The company reported that November same-store sales, including gasoline sales and foreign exchange effects, rose 1% in the United States and in Canada but fell 2% internationally. Globally, same-store sales rose 1% compared with November 2015. Excluding gasoline and currency exchange effects, U.S. sales rose 1%, Canadian sales rose 3% and international sales rose 4%. On the same basis, worldwide same-stores sales in the quarter rose 2%. Net sales for the month totaled $9.95 billion, up 3% year over year. Retail Metrics had projected a same-store sales increase of 1.3% (up 1.1% excluding gasoline sales).

There is a reasonable chance that Costco will raise its membership fees early in 2017, if not a little sooner. In 2011 the company boosted its basic fee by $5, and since then membership renewals have been running at around 85% to 90%. A similarly sized increase is not likely to send customers fleeing. Costco’s new credit card deal with Visa also could help boost memberships.

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A few analysts weighed in on Costco ahead of the earnings report:

• Cowen has a Buy rating with a $170 price target.
• Deutsche Bank has a Buy rating with a $194 price target.
• Credit Suisse has an Outperform rating with a $165 price target.
• Nomura has a Buy rating with a $185 price target.
• Guggenheim has a Neutral rating.
• Robert Baird has a Buy rating with a $175 price target.
• JPMorgan reiterated a Buy rating with a $171 price target.

So far in 2016, Costco has underperformed the broad markets, with the stock down about 7%.

Shares of Costco were trading at $150.61 on Wednesday, with a consensus analyst price target of $169.08 and a 52-week trading range of $138.57 to $169.59.

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