3 Retailers Booming Stocks: Walgreen, Costco, and AutoNation

Walgreen, Costco, and AutoNation delivered remarkably strong sales performance in May. Their ability to outperform the industry in difficult times says a lot about these companies and their competitive strengths.

Jun 7, 2014 at 7:40AM

The retail industry is going through a challenging period lately, but some companies are still delivering exceptional performance. According to recently released sales data, Walgreen (NASDAQ:WBA), Costco (NASDAQ:COST), and AutoNation (NYSE:AN) are firing on all cylinders.

Walgreen is a healthy business
Walgreen is a leading player in the drugstore and pharmacy business, and the company is benefiting from growing demand due to secular tailwinds, such as an aging population, broadening health care insurance coverage, and technical advancements in the health care industry.

Wag Image

Source: Walgreen

Walgreen has produced consistently strong financial performance over the last several years, and there is no slowdown at all in May. On the contrary, sales growth seems to be accelerating as the company leaves the unusually cold winter behind.

Walgreen announced sales of $6.57 billion during May, an increase of 6% from $6.19 billion in the same month in 2013, while total comparable-store sales increased 4.4%. Year-to-date sales for the first five months of 2014 were $31.90 billion, an increase of 5.5% from $30.24 billion in 2013.

Pharmacy sales were particularly strong in May, rising by 7.9% on a total basis. Comparable-store pharmacy sales jumped 7.6% when adjusted for calendar day shifts.

Walgreen reported a 3% increase total in front-end sales during the month, while comparable-store front-end sales increased 2.6%. Customer traffic in comparable stores fell 0.5%, but basket size increased 3.1% during the period.

Costco is the undisputed leader in discount retail
Discount retail is a notoriously competitive industry in which many companies are finding it hard to generate any kind of sales growth. But Costco keeps proving that its amazingly low prices and loyal customer base are invaluable strategic assets when it comes to sustaining performance in a difficult context.

Cost Image

Source: Costco

Costco reported sales of $8.78 billion for the month of May, an increase of 8% versus $8.13 billion during the same month in 2013. Total comparable sales increased by 6% during the month, better than the 4.6% increase forecasted on average by Wall Street analysts. Comparable sales grew 6% in the U.S. and 4% in international markets when measured in U.S dollars.

While rising gas prices had a positive impact on comparable sales, exchange rate fluctuations were a headwind for Costco during the month. Excluding the effects from gasoline prices and exchange rate fluctuations, comparable sales increased 6% in the U.S. and 7% in international markets, for a total increase of 6% at the company level.

Costco currently operates 657 warehouses, and the company plans to open six new warehouses prior to the end of its fiscal year on Aug. 31, 2014

AutoNation is running at full speed
Auto sales are usually quite cyclical and volatile, but AutoNation keeps delivering solid performance, both in terms of sales and profitability. In spite of the negative impact from harsh weather conditions in the first quarter of 2014, AutoNation managed to deliver growing sales and earnings during the period.

An Image

Source: AutoNation

AutoNation announced a total increase in sales of 6.5% during the quarter ended on March 31, reaching $4.36 billion versus $4.1 billion in the same period during the prior year. New vehicle units sales grew 6.1% to 71,223 units during the quarter, while used vehicle units sales increased by 3.2% to 52,136.

Both gross and operating profit margin expanded versus the prior year, and AutoNation repurchased 2.4 million shares during the quarter. This allowed the company to produce a healthy increase of 10% in adjusted earnings per share to $0.75, a historical record for AutoNation in the first quarter of the year.

May sales data showed AutoNation continued to perform remarkably well, the company announced retail sales of 30,275 new vehicles during the month, an increase of 15% in comparison to the same month during 2013. On a same-store basis, reported retail new vehicle unit sales in May were 29,471, an increase of 12%.

Performance was healthy across different segments; domestic units increased 12% to 9,289, import sales grew 17% to 15,413, and the premium luxury segment generated a sales increase of 17% to 5,573 vehicles.

Foolish takeaway
While many companies across different categories in the retail business are reporting lackluster financial performance lately, Walgreen, Costco, and AutoNation delivered remarkably solid sales figures for the month of May. Their ability to outperform the industry under difficult conditions speaks wonders about these companies and their competitive strengths.

Another stock with incredible competitive strength (it's not Apple!)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers