Costco Wholesale (NASDAQ:COST) will release its quarterly report on Thursday, and investors have been somewhat concerned lately about the possible impact that cold weather and a tough holiday shopping season could have on the warehouse retailer's results. Yet even though Target (NYSE:TGT), Wal-Mart (NYSE:WMT), and other big-box retailers struggled to meet some of the challenges they faced in the past quarter, Costco has some points in its favor that could help it keep growing even in a tough environment.

Costco has a business model that differs greatly from how most retailers operate. Rather than having to get all of its profits from product pricing, Costco focuses on getting its members to renew their memberships every year. That brings in a dependable stream of annual fee revenue that makes up a huge portion of its overall net income, and that gives Costco the ability to offer products at even lower prices than Wal-Mart and Target in many cases. Yet the question is whether even Costco can defy some of the trends that have hit its peers hard. Let's take an early look at what's been happening with Costco Wholesale over the past quarter and what we're likely to see in its report.

Source: Costco.

Stats on Costco Wholesale

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$26.67 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Costco earnings keep climbing this quarter?
Analysts have had a downbeat view in recent months on Costco earnings, cutting February-quarter estimates by $0.02 per share but knocking a more substantial 2% to 3% from their full-year projections for fiscal 2014 and 2015. The stock has also had a tough time, falling 7% since late November.

Costco's November-quarter results raised some concerns about the retailer's ability to keep besting Wal-Mart and Target in terms of growth. With same-store sales gains of just 3%, Costco wasn't able to grow its revenue or net income as fast as investors wanted. Moreover, a rise in overhead expenses more than outweighed smaller gains in gross margins, and even solid membership renewal rates of 87% weren't enough to give shareholders much comfort about its long-term prospects.

But we've already gotten some signs that Costco managed to survive the holiday slump that many other retailers suffered. December sales at Costco jumped 6%, with U.S. comps rising at a healthy 5% clip. Much of Costco's success has come from its emphasis on grocery items, which keeps customers coming back to the store even in cold weather and makes the holiday season much less of a major issue for Costco than for Target, Wal-Mart, and other retailers. In addition, its gas stations and the store-within-a-store businesses it runs within its warehouses also encourage repeat business.

Costco isn't resting on its laurels, though. The company has continued its ambitious expansion plans with new stores both in the U.S. and internationally. Moreover, it's also building up its e-commerce offerings in order to compete better against Amazon and other online retailers. Combined with providing more modern IT amenities within stores, Costco bears some additional cost from these initiatives, but they should help encourage faster growth in the future.

Costco has even managed to dodge a politically charged issue affecting many retailers. The minimum-wage debate has snared Wal-Mart and Target especially hard, with calls for higher pay igniting labor strife in areas across the nation. But Costco's higher-wage strategy recently attracted the attention of President Obama, who held out the retailer as a model of how paying workers more can still produce strong results.

In the Costco earnings report, watch to see how well the company's efforts do in boosting growth. Competition remains fierce, but Costco's edge over Wal-Mart and Target appears intact, and the retailer is even in a good position to fight off Amazon in its warehouse niche.

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