Costco Heads Down Under

Consumers are out in full force looking for bargains this summer. Target (NYSE: TGT  ) and TJX (NYSE: TJX  ) reported increases in same-store sales numbers for July. Numbers at both companies rose about 4% over last year. The real magic, however, is happening at wholesale warehouses, at home and abroad.

Summer sales
Same-store sales jumped 9.2% at soon-to-be-private BJ’s Wholesale Club (NYSE: BJ  ) . But it’s Costco (Nasdaq: COST  ) that claimed the crown as King of July. The wholesale warehouse cleaned up in the dog days, with same-store sales climbing 10% over last year. Revenue was up 15% over the same period. Internationally, things look even better for the wholesale outfit: Same-store sales skyrocketed 22%.

Heads up Down Under
International sales numbers are likely to continue climbing if Costco’s success in Australia is any indication. Two years of successful operations at the company’s first location in Melbourne prompted the opening of two more locations, one in Canberra and one in Sydney. Five thousand customers showed up to the Sydney location for its first day, and another 8,000 have purchased memberships at the Canberra location.

Rumors are swirling about a second location in Melbourne. Costco’s international presence is thinner in Australia compared to its operations in other countries:
 

Country

No. of Locations

Persons Per Costco Store

United States 428 732,000
Canada 81 420,000
Mexico 32 3,554,000
United Kingdom 22 2,850,000
Japan 8 15,810,000
Korea 7 6,965,000
Taiwan 6 3,845,000
Australia 3 7,256,000

Source: Company press release. Population numbers from CIA World Factbook.

Australian markets are nowhere near as saturated as most of the other countries where Costco is operating. Only Japan and Korea show similar potential for expansion.

Australia makes cents
Given Australia’s strong economy, it’s logical for Costco to continue to expand there.  The IMF recently projected GDP growth at 2% for the rest of the year and at 3.5% for next year. Though the state of the global economy may impact those numbers, Australia is in the midst of a mining boom driven by demand from China and other Asian economies that haven’t suffered as badly as other parts of the world recently.

Foolish takeaway
Costco is a business that has proved resilient in good times and bad, as evidenced by its recent strong same-store sales in the U.S. Investors (including our Global Gains team) have their eyes trained on Australia and its economic potential. Those interested in American companies as international investments should consider adding Costco to My Watchlist to stay abreast of relevant updates and analysis regarding the company’s growth abroad.

Interested in Costco’s bid at world domination? Click here for a Motley Fool Special Free Report "The Death of Wal-Mart -- The Real Cash Kings Changing the Face of Retail."

Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Costco. Motley Fool newsletter services have recommended buying shares of Costco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (8)

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.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1544896, ~/Articles/ArticleHandler.aspx, 8/30/2014 2:29:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement