Costco Continues to Impress

For a variety of reasons, I'm not a Costco (NASDAQ: COST  ) member, but I'm starting to think that I may be the only person left who isn't. At the end of last quarter, the company had 69 million cardholders across eight countries. Here's a fun fact: If you make the average household size to be around 2.5 people, then cardholders represent 23% of all households across those eight counties. Keep in mind that between Australia, Taiwan, and South Korea, the business only has twenty-one locations.

Growth cannot, will not, and does not stop
Even with that already massive cardholder base, the company has managed to grow membership, income, and year-over-year comparable sales. In today's August sales release, Costco put up a 4% increase in comparable sales over August of last year. That just beat out analysts' expectations, which had put growth at 3.8%. In July, it also grew comparable sales by 4%,  while in June it put up a 6% increase.

That's not only a generally good increase, it's an especially impressive feat in the face of consumer weakness cited by so many other retailers as a drag on growth. Wal-Mart, for instance, cited consumers under pressure, the payroll tax increase, and lower inflation as big drags on revenue in its last quarter. Target also cited consumer pressure as having a negative impact on sales. Wal-Mart reported flat comparable sales in its last quarter, while Target increased a modest 1.2% compared to last year.

Costco's comparable sales success lead to a 7% increase in revenue in August, which came in at $7.95 billion. Total sales for the quarter ended up 1% at $31.8 billion, which fell short of analysts' expectations of $33.1 billion.

What can Costco do better?
That the company has had such success doesn't mean that there are no areas for improvement. Obviously, the overall revenue growth could have been higher in the quarter, and some of that is in the hands of Costco's management. The driver of that growth is largely going to come from physical expansion. Costco was planning to complete 28 new locations this year, which was up from just 12 last year .

The future for Costco has to be in its continued expansion, especially overseas. The business is doing very well in Asia, and the company is looking for new opportunities there. This year, for instance, Costco opened five of its 13 planned Japanese locations.

Overall, Costco continues to be in a position of strength, and its next fiscal year should be another winner. The company reports its official fourth quarter and year end on Oct. 9. I'm excited to hear what the company's fiscal 2014 plans are -- and any retail investor should be, too.

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  • Report this Comment On September 05, 2013, at 5:08 PM, BullDog121 wrote:

    Cosco is a solid organization. They pay their folks well and sell quality items at fair prices. I have never been disappointed with a "Kirkland" brand product, we even purchased a live Christmas Tree last year and it was awsome. The best thing in the store has gotta be thier apple and pumpkin pies!

  • Report this Comment On September 05, 2013, at 9:05 PM, djoverbey wrote:

    Costco is top of my list of retailers. I have several medical issues that require expensive medications. Costco prices have enabled me to take all as prescribed vs skipping doses and not taking some. They save me thousands of dollars a year. Yes, thousands. I also enjoy many of their other products and my Vet recommends the Kirkland brand of dog food which saves me $25.00 a bag. Amazing and I hope they continue to succeed!

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