Costco (NASDAQ: COST) Shares have been a trusted star for three and a half decades since the IPO. In the last 10 years it has acquired almost 500% և paying increasing dividends.
But as epidemic restrictions loosen in many regions, Costco securities are trading at an all-time high, is that still a bet for future growth?
Unique success continues
Costco, like large supermarket chains, typically shows three-digit quarterly sales growth. That changed in 2020, when the epidemic boosted more sales as customers stocked up on essentials, with sales up double-digit year-on-year over the past four quarters. In fact, its highest growth was recorded in the last reporting quarter. The third financial quarter ended on May 9 with a 22% increase in annual sales. It happened when the economy started to reopen, people focused on trivial things. So that you do not think that everything can slow down sharply after that, July sales increased by 16%.
Costco has struggled with supply issues for some large items, such as electrical appliances, over the past year, and it has had its incredible results with low supplies of expensive items. Some categories, such as travel և optics, were completely closed for a few months. But those trends have reversed as these categories re-emerge, so even in the event of a slowdown in the storage of essential goods, other sales have grown.
E-commerce has also slowed, but is still growing at 41% in the quarter and 7% in July. The company improved the logistics of the e-commerce program, so shipping was faster and cheaper, and profit margins were improved. Costco came under inflationary pressure in the third quarter. The gross margin was slightly lower year by year. The company said that inflation could affect prices, but so far it is trying to keep retail prices low. Costco margins are generally around 11% to 12% lower than the revenues of other retail chains. But that offsets some of the loyalty of customers through large amounts of membership fees.
What awaits the future?
Costco, believe it or not, is quite small in terms of the number of stores. As of July, it has 813 warehouses, 562 in the United States and the rest internationally. It is nowhere near saturated, it plans to open new warehouses, but it is quite slow compared to such companies. So far in 2021, Costco has opened 21 brand new stores; it expects 25 to open in each of the next two fiscal years. Recently, the company created its first footprint in China with second-store plans. Costco opens a whole new կայ huge market in the Middle Kingdom.
Walmart:In contrast, it has almost 5,000 stores in the US alone, meanwhile Target: has more than 1900. Costco is the 12th largest company in the United States in terms of sales, which is far behind Walmart, but far ahead of Target, which means that each store brings in more money. That’s why it does not need to continue its fierce obsession, և why investors can expect Costco to continue to grow steadily for a very long time.
Costco’s customers are loyal, և retention generally fluctuates within 90%, plus it adds millions of new customers each year.
In the end, its dividend is only 0.66%, but Costco has raised revenue for 14 years a year, and since 2013 has paid a special dividend of $ 5.10 per share every two or three years.
My conclusion is that investors should not worry about buying the highest prices of all time. Costco can invest in growth և profits in the future.
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