A Big Upgrade for Costco

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After being locked at a four-star rank for years, Costco (Nasdaq: COST  ) has impressed enough top-performing members of our 170,000-strong Motley Fool CAPS community to finally reach the top five-star level. A total of 3,964 members have given their opinion on the big-box retailer, with many offering analysis and commentary to explain their recent optimism.

CAPS members rave about Costco's business model, which has held up better than many competitors' during the downturn. The current retail environment is still prompting conservative expectations from peers like Target (NYSE: TGT  ) and Wal-Mart Stores (NYSE: WMT  ) , but many investors believe Costco will continue to do well at attracting budget-conscious customers. As the company continues to post positive same-store sales in recent months, investors like the momentum Costco has been delivering.                            

And Costco doesn't seem to be buckling under the strain of price competition from Wal-Mart, the way BJ's Wholesale Club (NYSE: BJ  ) and supermarket chains like Safeway (NYSE: SWY  ) and SUPERVALU (NYSE: SVU  ) have been. Costco's core merchandise categories of food and sundries have remained strong, with positive sales comparisons in each of its respective subcategories in the fiscal third quarter.    

The effects of the downturn prompted a number of retailers like the struggling Sears Holdings (Nasdaq: SHLD  ) to close retail stores over the past year. In contrast, CAPS members applaud Costco's plans to continue hunting for more locations for its giant warehouses. The company plans to spend $1 billion on new and remodeled warehouses in fiscal 2010, and it's also remaining flexible in its approach to enter some markets. In an effort to get into some regions where land is scarce, the company is testing the idea of taking up space in vacant department stores, playing the role of a mall anchor. With its expanding presence and strong competitive position, CAPS members are growing more confident about the company's long-term outlook for growth, wherever the economy might head from here.

Do you think Costco deserves its elevated status? Add your thoughts in the comments box below on this page, or head over to CAPS to rate the company and check out all the information and opinions the community offers, absolutely free.

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Fool contributor Dave Mock likes to upgrade his retail shopping experience with a churro or ice cream at checkout. He owns no shares of companies mentioned here. Costco and Wal-Mart are Inside Value selections. Costco is a Stock Advisor pick. The Fool owns shares of Costco and Wal-Mart.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy can be run off methanol.

Read/Post Comments (2) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 20, 2010, at 10:33 AM, BigAl777 wrote:

    You speak of the competition bucking under the pricing strategies of WalMart,as well they should be.WalMart is able to undersell anybody,including Costco.At least the competition is not openly disregarding this factor.Al

  • Report this Comment On September 22, 2010, at 7:16 PM, LawrenceSchott wrote:

    I have been a member at Costco for many years. I do not shop at Wal Mart even though it is closer to my house. I seldom shop at Target. Costco has quality food and other merchandise at fair prices. Costco has good management. I trust Costco to buy wisely, and stand behind their merchandise. I particularly respect their treatment of their employees, and I am willing to pay a few more pennies in order that they get fair wages. I believe that saisfied employees are more likely to create a satisfying buying experience for me. That's a win-win situation. Thank you, Costco.

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