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Category: Stock Market and Costco Wholesale (COST)
Date: 25 September 2020 Stock Price of Costco (COST): $347 We take a look at the 4th quarter earnings report of their 2020 fiscal year of Costco Wholesale, one of the worlds largest retailers that operates 785 warehouses, of which 546 of them are located in the United States. During the 4Q 2020 the group reported revenues of $53.3 billion and net income of $1.389 billion.
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Costco currently operates 795 warehouses, including 552 in the United States and Puerto Rico, 101 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 13 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia."
About Costco Wholesale (COST)
Costco currently operates 795 warehouses, including 552 in the United States and Puerto Rico, 101 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 13 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.
Our warehouses on average operate on a seven-day, 70-hour week. Gasoline operations generally have extended hours. Because the hours of operation are shorter than other retailers, and due to other efficiencies inherent in a warehouse-type operation, labor costs are lower relative to the volume of sales. Merchandise is generally stored on racks above the sales floor and displayed on pallets containing large quantities, reducing labor required. In general, with variations by country, our warehouses accept certain credit cards, including Costco co-branded cards, debit cards, cash, checks, and our proprietary stored-value card (shop card). Our strategy is to provide our members with a broad range of high-quality merchandise at prices we believe are consistently lower than elsewhere. We seek to limit items to fast-selling models, sizes, and colors.
We carry an average of approximately 3,700 active stock keeping units (SKUs) per warehouse in our core warehouse business, significantly less than other broadline retailers. Many consumable products are offered for sale in case, carton, or multiple-pack quantities only. In keeping with our policy of member satisfaction, we generally accept returns of merchandise. On certain electronic items, we typically have a 90-day return policy and provide, free of charge, technical support services, as well as an extended warranty. Additional third-party warranty coverage is sold on certain electronic items.
We offer merchandise in the following categories:
• Food and Sundries (including dry foods, packaged foods, groceries, snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies)
• Hardlines (including major appliances, electronics, health and beauty aids, hardware, and garden and patio)
• Fresh Foods (including meat, produce, deli, and bakery)
• Softlines (including apparel and small appliances)
• Ancillary (including gasoline and pharmacy businesses)
Our warehouses on average operate on a seven-day, 70-hour week. Gasoline operations generally have extended hours. Because the hours of operation are shorter than other retailers, and due to other efficiencies inherent in a warehouse-type operation, labor costs are lower relative to the volume of sales. Merchandise is generally stored on racks above the sales floor and displayed on pallets containing large quantities, reducing labor required. In general, with variations by country, our warehouses accept certain credit cards, including Costco co-branded cards, debit cards, cash, checks, and our proprietary stored-value card (shop card). Our strategy is to provide our members with a broad range of high-quality merchandise at prices we believe are consistently lower than elsewhere. We seek to limit items to fast-selling models, sizes, and colors.
We carry an average of approximately 3,700 active stock keeping units (SKUs) per warehouse in our core warehouse business, significantly less than other broadline retailers. Many consumable products are offered for sale in case, carton, or multiple-pack quantities only. In keeping with our policy of member satisfaction, we generally accept returns of merchandise. On certain electronic items, we typically have a 90-day return policy and provide, free of charge, technical support services, as well as an extended warranty. Additional third-party warranty coverage is sold on certain electronic items.
We offer merchandise in the following categories:
• Food and Sundries (including dry foods, packaged foods, groceries, snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies)
• Hardlines (including major appliances, electronics, health and beauty aids, hardware, and garden and patio)
• Fresh Foods (including meat, produce, deli, and bakery)
• Softlines (including apparel and small appliances)
• Ancillary (including gasoline and pharmacy businesses)
Overview of Costco's 4th quarter 2020 earnings report
- Total Revenue: $53.38 billion (up from $47.498 billion for the same quarter of the previous year)
- Total Revenue increased by 12.3% over the last 12 months
- Merchandising costs: $46.401 billion (up from $41.130 billion for the same quarter of the previous year)
- Merchandising costs increased by 12.3% over the last 12 months
- Net income: $1.389 billion (up from $1.097 billion for the same quarter of the previous year)
- Diluted earnings per share: $3.13 (up from $2.47 per share for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 444.231 million (up from 443.400 million for the same quarter of the previous year)
- Cash and cash equivalents: $12.277 billion
- Cash and cash equivalents per share: $27.63
- Cash and cash equivalents makes up 7.9% of Costco's market capital
- Cash and cash equivalents makes up 21.9% of Costco's total assets
- Accounts receivable: $1.550 billion
- Accounts receivable makes up 2.79% of Costco's total assets
- Inventories: $12.242 billion (up from $11.395 billion for the same quarter of the previous year)
- Inventories makes up 22% of Costco's total assets
- Costco's inventories grew by 7.4% over the last 12 months
- Stockholders equity of Costco: $18.705 billion
- Stockholders equity per share for Costco : $42.10
- So Costco is trading at 8.2 times it stockholders equity per share which is well within the expected range of between 2 and 4 times most companies tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7
- Stockholders equity per share for Costco : $42.10
Costco Wholesale's management commentary on their 4th quarter 2020 earnings report
ISSAQUAH, Wash., Sept. 24, 2020 (GLOBE NEWSWIRE) -- Costco Wholesale Corporation (“Costco” or the “Company”) (Nasdaq: COST) today announced its operating results for the 16-week fourth quarter and the 52-week fiscal year, ended August 30, 2020.
Net sales for the quarter increased 12.5 percent, to $52.28 billion from $46.45 billion last year. Net sales for the fiscal year increased 9.3 percent, to $163.22 billion from $149.35 billion last year.
Net sales for the quarter increased 12.5 percent, to $52.28 billion from $46.45 billion last year. Net sales for the fiscal year increased 9.3 percent, to $163.22 billion from $149.35 billion last year.
Net income for the fourth quarter was $1.389 billion, or $3.13 per diluted share, compared to $1.097 billion, or $2.47 per diluted share last year. This year’s fourth quarter was negatively impacted by incremental expense related to COVID-19 premium wages and sanitation costs of $281 million pretax ($0.47 per diluted share) and a $36 million pretax charge ($0.06 per diluted share) related to the prepayment of $1.5 billion of debt. These items were partially offset by an $84 million pretax benefit ($0.15 per diluted share) for the partial reversal of a reserve of $123 million pretax ($0.22 cents per diluted share), related to a product tax assessment taken in the fourth quarter of last year.
Net income for the fiscal year was $4.00 billion, or $9.02 per diluted share, compared to $3.66 billion, or $8.26 per diluted share in the prior year.
Costco currently operates 795 warehouses, including 552 in the United States and Puerto Rico, 101 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 13 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.
Net income for the fiscal year was $4.00 billion, or $9.02 per diluted share, compared to $3.66 billion, or $8.26 per diluted share in the prior year.
Costco currently operates 795 warehouses, including 552 in the United States and Puerto Rico, 101 in Canada, 39 in Mexico, 29 in the United Kingdom, 27 in Japan, 16 in Korea, 13 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan, and Australia.
Costco Wholesale (NASDAQ: COST) stock price history
The image below, obtained from Google, shows the stock price history of Costco Wholesale for the last 5 years. And it's been a very good time for Costco stockholders. 5 years ago the stock was trading at around $147 a stock and its currently trading at $347 a stock. That's a very strong return of 124% provided by Costco over the last 5 years.
The stock of Costco is trading at a lot closer to its 52 week high of $363.674 than it is to its 52 week low of $271.28 which to us is a clear indication that the short term sentiment and momentum of Costco stock is very positive.
The stock of Costco is trading at a lot closer to its 52 week high of $363.674 than it is to its 52 week low of $271.28 which to us is a clear indication that the short term sentiment and momentum of Costco stock is very positive.
Costco (COST) stock vs Walmart (WMT) stock over the last 5 years
The image below shows the stock price history of Costco (COST) and Walmart (WMT) over the last 5 years. These two firms are two of the largest general retail stores in the world. As the image shows the stock price trends of these two firms are very similar. The summary below shows the stock price performance of Costco and Walmart over the last 5 years
Walmart's stock has slightly outperformed that of Costco over the last 5 years.
- Walmart: 133.1%
- Costco: 123.5%
Walmart's stock has slightly outperformed that of Costco over the last 5 years.
Recent coverage of Costco Wholesale
The extract below shows some of the latest coverage on Costco Wholesale obtained from Finance.Yahoo.com
(Reuters) - Costco Wholesale Corp <COST.O> recorded high coronavirus-related costs for the second straight quarter, overshadowing its better-than-expected results and sending the company's shares down 3% in extended trading on Thursday. The warehouse chain spent about $281 million on employee bonuses and sanitizing its warehouses in the fourth quarter, mirroring a trend of rising costs across U.S. retailers during the health crisis.
Costco had estimated in May that COVID-19-realted costs would exceed $100 million, but would be lower than the $283 million incurred in the prior quarter. "$281 million is over $100 million but quite a bit larger," Chief Financial Officer Richard Galanti said on an earnings call. The company cited the $2-an-hour premium paid to employees as a factor for the jump in costs. The bonus costs Costco $14 million a week.
"We've committed to doing that at least through, I believe, the first eight weeks of this fiscal quarter," Galanti said.
Several U.S. retailers, including Kroger Co <KR.N> and Amazon.com Inc <AMZN.O>, have come under fire for stopping hazard pay for their workers. Higher demand for fresh produce, appliances and gardening and sporting goods helped Costco's total revenue climb 12.4% to $53.38 billion in the quarter ended Aug. 30, beating the average estimate of $52.08 billion, according to Refinitiv data.
Traffic at the warehouse chain, where customers typically buy items in bulk at lower prices, also ticked up in the quarter, after declining about 20% in April, as COVID-19 restrictions eased and it brought back food samples. Revenue from memberships rose 5.3% to $1.11 billion, while online sales nearly doubled. Excluding items, Costco earned $3.04 per share, beating estimates of $2.84.
Read the full article here
(Reuters) - Costco Wholesale Corp <COST.O> recorded high coronavirus-related costs for the second straight quarter, overshadowing its better-than-expected results and sending the company's shares down 3% in extended trading on Thursday. The warehouse chain spent about $281 million on employee bonuses and sanitizing its warehouses in the fourth quarter, mirroring a trend of rising costs across U.S. retailers during the health crisis.
Costco had estimated in May that COVID-19-realted costs would exceed $100 million, but would be lower than the $283 million incurred in the prior quarter. "$281 million is over $100 million but quite a bit larger," Chief Financial Officer Richard Galanti said on an earnings call. The company cited the $2-an-hour premium paid to employees as a factor for the jump in costs. The bonus costs Costco $14 million a week.
"We've committed to doing that at least through, I believe, the first eight weeks of this fiscal quarter," Galanti said.
Several U.S. retailers, including Kroger Co <KR.N> and Amazon.com Inc <AMZN.O>, have come under fire for stopping hazard pay for their workers. Higher demand for fresh produce, appliances and gardening and sporting goods helped Costco's total revenue climb 12.4% to $53.38 billion in the quarter ended Aug. 30, beating the average estimate of $52.08 billion, according to Refinitiv data.
Traffic at the warehouse chain, where customers typically buy items in bulk at lower prices, also ticked up in the quarter, after declining about 20% in April, as COVID-19 restrictions eased and it brought back food samples. Revenue from memberships rose 5.3% to $1.11 billion, while online sales nearly doubled. Excluding items, Costco earned $3.04 per share, beating estimates of $2.84.
Read the full article here
Costco Wholesale (NASDAQ: COST) latest stock valuation
So what is Costco Wholesale (NASDAQ: COST) stock worth based on the release of their latest earnings report? Based on their earnings report and the guidance provided our valuation models provide a target (full value) price for Costco of $246.80 a stock. We therefore believe that the stock of Costco Wholesale is overvalued at its current price of $347
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $246.80. So a good entry point into Costco stock would be at $222 or below. We expect the stock of Costco Wholesale to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months as
Since the stock of Costco is trading at well above our suggested entry point and our full value price we rate the stock of Costco as avoid.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $246.80. So a good entry point into Costco stock would be at $222 or below. We expect the stock of Costco Wholesale to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months as
Since the stock of Costco is trading at well above our suggested entry point and our full value price we rate the stock of Costco as avoid.
Next earnings release of Costco Wholesale
It is expected that Costco Wholesale will release their 1st quarter 2021 earnings report in mid December 2020