In this segment of the Motley Fool Money podcast, host Chris Hill, Million Dollar Portfolio's Jason Moser and Matt Argersinger, and Total Income's Ron Gross break down the latest numbers from discount warehouse Costco (NASDAQ:COST), and they can't help but be impressed. Comps are up for 14 straight months, and the all-important retention rate is at 90% in the U.S. And beyond that, there's big e-commerce growth, and the chain is innovating.
Meanwhile, cloud SaaS provider Adobe Systems (NASDAQ:ADBE) beat in its fourth quarter and guidance got a boost. Anyone who was worried about its cloud transition can probably relax.
A full transcript follows the video.
This video was recorded on Dec. 15, 2017.
Chris Hill: Costco's same-store sales in the first quarter rose more than 10%. Ron, their e-commerce sales sure are heading in the right direction.
Ron Gross: For those who thought Costco's best days were behind them -- maybe I was one of them --
Matt Argersinger: I was certainly one of them.
Gross: -- we should scratch our heads, because these numbers indicate that certainly may not be the case. And as you said, the comp store sales numbers are really impressive. 14 straight months of comp store sale increases. Overall net sales up 13%. Retention rate, it's a big number here, because let's remember Costco actually makes most of its money from its membership fees, so you have to retain that customer, 90% in the U.S., 87% worldwide. Very impressive numbers. They're introducing new initiatives like Costco grocery, click and collect where you can buy laptops and jewelry online and then go into the store to pick them up and hopefully spend some additional dollars while you look around. Costco is not sitting on their old model. They're moving into the e-commerce world, and so far doing a nice job.
Hill: I think the click and collect is going to be worth watching, because I've never heard anyone who shops at Costco talk about how they went to Costco and they bought absolutely everything on my list and nothing more.
Gross: It's physically impossible.
Hill: I hear all the time that it's like, as soon as you go, "Oh, well, I had my list, but I bought so much more." Fourth quarter results for Adobe Systems came in better than expected, and Adobe Systems management also raised guidance for 2018. Things are looking pretty good over there, Matty.
Argersinger: Looking really good. But several years ago things didn't look good, because I think everyone, including me to a certain extent, was worried about this transition from selling software as a stand-alone package, what they call perpetual licenses to software as a subscription in the cloud. And Adobe, like many companies, went through this transition. And the worries were, this is going to cannibalize revenue, it's going to hurt margins, you're not going to make enough money off of upgrades, piracy risk. As it turns out, they built great product. And by the way, if you're a standard bearer like Adobe is, yeah, people are going to pay for it and they're going to keep coming back. And that's kind of what's happened with Adobe. Sales were up 25% year over year. Profit margins at an all-time high. You mentioned they raised guidance. There's a ton to like Adobe except maybe the stock price right now, which is about 40X forward earnings. But other than that, if they continue to grow at 25%, it's not a high multiple.