Costco continues to benefit because people are eating at home far more than they did before the pandemic.
Oli Scarff/AFP via Getty Images
Costco Wholesale will report December same-store sales in early January, a chance for the discounter to show that it finished the year on an upbeat note after a rare miss in November.
Guggenheim analyst John Heinbockel is predicting core comparable sales growth of 10%, a continuation of the slowdown from pandemic-induced highs that began in the fall. He attributes most of this to slower discretionary spending, as consumers in general tended to do their shopping earlier—the Christmas shopping season began in October this year—and the fact that limited supplies are still affecting more expensive items, such as appliances.
Some of those factors probably eased in December, but Heinbockel notes that “there could still be some residual effects of the factors” that led to the weaker-than-expected November report.
He expects the results will show essential consumable categories remained strong in December, potentially rising 20% or more. Consumers continue to eat at home more frequently than before the pandemic, especially with colder weather preventing outdoor dining in much of the country.
How much consumers spent on discretionary categories may be the deciding factor in how strong December comparable sales are. “A stronger performance is possible, especially in less inventory-constrained categories,” Heinbockel wrote.
Costco (ticker: COST) reported another round of double-digit same-store sales growth in November, but the results weren’t quite as strong as analysts had expected following a string of big blowouts in sales growth. The stock fell in response, and the retailer’s latest earnings report earlier this month failed to move the shares substantially.
Heinbockel reiterated a Neutral rating on the shares, noting that even after a recent pullback, they remain expensive, with one of the highest valuations among large retailers. The shares have risen 24% year to date, steadily breaking through to new highs.
The stock was up 0.1% to $365 in morning trading, while the S&P 500 was 0.7% higher.
Write to Teresa Rivas at [email protected]
