On Thursday morning, we'll get the first-quarter 2008 results from warehouse retailer Costco Wholesale (NASDAQ:COST). Go back and check out last quarter's joyful report, then come back to see whether you'd buy this one for a dollar.
What Fools say:
Here's how Costco's CAPS scoring rates against some of its peers and competitors:
|
Market Cap (millions) |
Trailing P/E Ratio |
CAPS Rating | |
|---|---|---|---|
|
Wal-Mart Stores (NYSE:WMT) |
$199,520 |
16.3 | |
|
Target (NYSE:TGT) |
$46,195 |
16.3 | |
|
Costco |
$30,928 |
30.2 | |
|
Best Buy (NYSE:BBY) |
$22,290 |
18.9 | |
|
BJ's Wholesale Club (NYSE:BJ) |
$2,378 |
28.3 |
Costco's stock looks rather pricey next to its rivals, but our CAPS players still like the stock, thanks to a unique high-end store concept and great management. On the downside, our bears see a recession coming, and they think that Costco is in for more hurtin' than most retailers.
What management says:
In the last earnings call, Chief Financial Officer Rick Galanti noted that continued comparable-stores growth around 4%-5% would place bottom-line results close to the top of the guidance range. Since Galanti also called the Thomson First Call earnings estimate of $0.59 per share "a shade high," it sounds like we should expect a result somewhere in the neighborhood of $0.55.
What management does:
These margins are slim, even for a bulk-oriented retailer. That's OK, as long as the net margin remains positive and revenue growth outruns inflation. Still, it's a bit disappointing to see earnings growth backing up into shrinkage territory.
|
5/06 |
9/06 |
11/06 |
2/07 |
5/07 |
9/07 | |
|---|---|---|---|---|---|---|
|
Gross |
12.4% |
12.3% |
12.3% |
12.3% |
12.2% |
12.3% |
|
Operating |
2.8% |
2.7% |
2.7% |
2.6% |
2.5% |
2.5% |
|
Net |
1.9% |
1.8% |
1.8% |
1.7% |
1.7% |
1.7% |
|
FCF/Revenue |
1.1% |
1% |
1.2% |
0.4% |
1.3% |
1.1% |
|
Y-O-Y Growth |
5/06 |
9/06 |
11/06 |
2/07 |
5/07 |
9/07 |
|---|---|---|---|---|---|---|
|
Revenue |
10.9% |
13.6% |
13% |
12.1% |
11.9% |
7.1% |
|
Earnings |
9.7% |
3.8% |
3.5% |
0.1% |
-3.3% |
-1.9% |
One Fool says:
The share price is up some 22% since the last earnings report, and it keeps pushing the all-time high limits higher. The reasons for this optimism aren't entirely clear -- after all, aren't we supposed to be headed for a severe consumer crash?
Perhaps high-end consumers are coming to the rescue here. If Tiffany (NYSE:TIF) and Nordstrom (NYSE:JWN) are doing all right, then Costco should remain the warehouse chain to beat. Then again, even the mighty N has taken its lumps lately. Costco needs to impress on Thursday in order to support its lofty valuation -- and I'm not sure that will happen.
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