Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Costco Stock Popped 10.3% in June

By Joe Tenebruso - Jul 5, 2019 at 5:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The warehouse retailer's stores continue to generate steady increases in sales and profits.

What happened

Shares of Costco Wholesale ( COST -0.82% ) rose more than 10% last month, according to data provided by S&P Global Market Intelligence, following its fiscal third-quarter earnings release. 

So what

Costco's net sales climbed 7.4% year over year, to $33.96 billion, driven by new store openings and strong comparable-store sales growth. The discount chain's comps grew 5.5%, including a 7% increase in its key U.S. market. Notably, Costco's e-commerce sales jumped 22%, giving evidence that the retailer is performing well in this increasingly important area.

All told, Costco's net income -- excluding a one-time tax benefit -- rose 11%, to $833 million, or $1.89 per share. Analysts had been expecting earnings per share of only $1.81. 

A businessperson pointing to an upwardly sloping chart.

Costco's revenue and earnings are growing at an impressive clip. Image source: Getty Images.

Now what

At the core of Costco's business strategy is its membership program. In exchange for a modest annual fee, members get to shop at Costco's discount-filled stores. And the more the company earns in membership fees, the more savings it can pass on to its customers. It's a virtuous cycle that has propelled Costco's sales and profits for decades.

Costco's subscriber growth figures and membership renewal rates -- which typically clock in at roughly 90% -- show that shoppers appreciate the value the warehouse chain provides. And with Costco's stock rising to new all-time highs in recent weeks, it appears that investors also appreciate the popular warehouse chain's simple, but effective, strategy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$525.51 (-0.82%) $-4.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
634%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.