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Why Costco Stock Surged Today

By Timothy Green - Updated Mar 2, 2020 at 2:42PM

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Consumers are reportedly stocking up as the novel coronavirus outbreak spreads.

What happened

Shares of Costco Wholesale (COST 2.01%) jumped on Monday following reports of elevated traffic over the weekend as consumers stocked up on supplies. There are now 91 confirmed cases of the novel coronavirus in the U.S., and two confirmed deaths. Costco stock was up 8.3% at 2 p.m. EST today.

So what

While it's unclear how widespread the traffic boost for Costco was over the weekend, social media posts showed long lines and empty shelves at some locations. This will provide a short-term increase in sales for the retailer, but it could have the effect of pulling forward demand. Once the crisis passes, Costco may see weaker sales for a time as customers work through their supplies.

A rising chart.

Image source: Getty Images.

Costco's sales had been solid even before the outbreak prompted consumers to stock up. In January, it reported comparable-store sales growth of 5.6% in the U.S.

Now what

Monday's rally erases some of the losses Costco stock suffered during the coronavirus-related sell-off last week. Shares of the warehouse club had fallen about 12.7% by market close on Friday as investors went into panic mode over the virus.

How Costco stock performs in the long run doesn't depend on short-term developments like this. While it will likely continue to be volatile as the outbreak plays out, long-term investors should ignore the noise.

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