Why Costco Stock Deserves Your Investment Now
Invest in Costco Stock: 4 Compelling Reasons Revealed for Investors
The warehouse retailer is still an evergreen investment. Costco (NASDAQ: COST) has been one of the market's most resilient retail stocks since its public debut in 1985. The warehouse retailer endured four major U.S. recessions while turning a $1,000 investment in its IPO into more than $436,600.
1. Membership growth and high renewal rates: Costco can sell its products at such low prices and margins because it generates most of its profit from its high-margin membership fees. To keep growing, it needs to keep gaining new members while maintaining high renewal rates.
- In the second quarter of fiscal 2024 (which ended in February), Costco's total number of cardholders rose 7.3% year over year to about 132 million.
- Its worldwide renewal rate stayed flat year over year at 90.5%, but its renewal rate in the U.S. and Canada reached 92.9%.
2. Expanding brick-and-mortar presence: Costco's low prices, sales of bulk products, and sticky membership plans enable it to compete effectively against e-commerce giants like Amazon and superstores like Walmart.
- Instead of closing its brick-and-mortar stores, Costco expanded its presence from 638 warehouses at the end of fiscal 2013 to 875 warehouses at the end of the first quarter of fiscal 2024.
- Costco plans to open 30 new locations for all of fiscal 2024.
3. Consistent comps growth: Costco experienced growth throughout fiscal 2020 and fiscal 2021 but its adjusted comps growth decelerated over the following years.
- Its comps growth stabilized in the first half of fiscal 2024 with accelerating growth in Canada, its other international, and e-commerce segments.
4. Stabilizing margins: In fiscal 2023, Costco's gross margin declined, but in the first half of fiscal 2024, its gross margin expanded again.
- Costco hasn't raised its membership fees since 2017, but it's widely expected to hike those fees in the near future.
- Analysts expect its earnings per share (EPS) to grow 14% in fiscal 2024 and 8% in fiscal 2025.
Conclusion: Costco's consistent growth, strong business model, and future prospects make it a compelling choice for investors looking for long-term profits.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.