Costco Wholesale (Nasdaq: COST) was one of many retailers that reported a healthy increase in same-store sales in May today. Despite last year's concerns about its unusually generous employee benefits, as well as costs associated with workers' comp issues, Costco seems to be redeeming itself.
In May, Costco's same-store sales grew 16%, with overall sales increasing 19% to $3.80 billion. The uptick in sales was associated to customers' robust demand for electronics and food.
Several months ago, rival Wal-Mart (NYSE: WMT) cited the high price of gas as a reason its customers might get tight with the old wallets. However, Costco might be well insulated against such an environment. First of all, many Costco warehouses offer discount gas for their members. (Of course, some Wal-Marts do the same thing.) That's a good lure, especially if people begin to consolidate their errands into as few stops as possible.
At the same time, it's hard to ignore the complaints of people who are noticing the high cost of food at their local grocery stores -- with receipts likely bolstered even further by rising dairy costs. Again, that makes Costco a tempting destination.
While one could argue that Costco, a long-time Motley Fool Stock Advisor pick, deals with a discount universe, it appeals across all demographics. Not only do its bulk goods appeal to penny-pinchers, but it's also nice to be able to remove kitchen cleaner, paper towels, garbage bags, or various such items from one's shopping list for months (sometimes years!) at a time.
It's hard to ignore the summer factor. Anyone who's ever been to a Costco -- or its rivals BJ's Wholesale Club (NYSE: BJ) and Sam's Club -- knows the appeal of bulk food for barbecues and summer parties. Surely you haven't missed the customers who show up with a cart stacked high with cases of soda and beer, 55-gallon drums of potato salad, and enough hamburger patties to feed an army, for example.
Costco's popularity in May is no surprise, considering just last week W.D. Crotty explored the company's latest quarter, as well as many of the things to like about Costco as an investment. Though it's trading near its 52-week high and sporting a forward P/E of 22, considering its strong management, popularity with consumers, and projected growth, it seems worthwhile to keep an eye on this one.
Costco has been a
Motley Fool Stock Advisor
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Alyce Lomax does not own shares of any of the companies mentioned. She's about due a trip to Costco to aid and abet in spring-cleaning.
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