Costco’s Retail Sales For The Month Of April Show Surprising Strength

Costco’s Retail Sales For The Month Of April Show Surprising Strength

Costco Wholesale Corporation and some other large retailers boosted investors’ confidence with stronger than expected sales performance in April

By Muhammad Saad Khan on May 9, 2014 at 7:12 am EST

Costco Wholesale Corporation (COST) stock was up 2.5% yesterday on news that the company reported stronger-than-expected sales for the month of April.

The Washington-based company followed in the footsteps of its counterparts, including The Walgreen Company (WAG) and Rite Aid Corporation (RAD), who outperformed the Street’s earnings expectations for last month. The overall performance indicates an upbeat dynamic in the industry.

According to the Thomson Reuters’ same-store sales index, a group of ten retailers reported that their comparable sales increased 6.4%, beating analysts’ expectations by 2.3 percentage points (ppts).

Higher-than-expected same store sales growth incorporates the impact of the shift in Easter timings. Some of the growth in the metric is also attributable to warmer weather seen in the month of April.

Momentum in retail sales reflects an improvement in the pace of economic recovery and is expected to uplift investors’ confidence going forward.

Costco: Beats Expectations

Costco reported that its same store sales increased by 5% for the month of April, compared to the average growth of 3.7% seen in the past three months. The company’s same store sales beat analysts’ expectations of a lower increase of 3.2%.

The US continued to be the primary growth driver; the region registered growth of 5% in its comparable store sales, higher when compared to 2% growth seen in the international markets.

International markets provide greater growth opportunities for Costco; however, volatility in foreign exchange rates significantly impacts the company’s top-line growth attributable to the said segment. The company’s comparable store sales grew by 7% in the international markets when discounted for the impact of foreign exchange fluctuations and gasoline prices.

Costco reported that its net sales increased by 7% to $8.56 billion for the month of April. Easter timings positively impacted many of the retailers during April; however, the shift in the holidays resulted in depressing Costco’s sales. The company’s stores remained closed for Easter, and therefore, its results for April consisted of only 27 days compared to 28 days recorded in the same period last year.

Costco’s management said that calendar shifts led to a negative impact of about 1.5-2% on both net sales and comparable store sales. On the other hand, inflation in gasoline prices as well as improved weather positively impacted the company’s top line growth.

Strong performance from the warehouse retailer despite maturing demand for staples in the US reflects the store’s potential to keep gaining market share from competitors such as Sam’s Club of Wal-Mart Stores, Inc. (WMT).

Other Retailers Post Strong Results

Retailers including Walgreen Company, Rite Aid Corporation, The Gap Inc. (GPS), L Brands Inc (LB), and Zumiez Inc. (ZUMZ) reported strong sales for the month of April, which uplifted investors’ confidence, leading them to bid up the stocks. These retailers reported an average growth of 7.6% in their comparable store sales for the month of April, which was a relief to investors who were losing confidence in the retail market in the face of a slowdown in consumer shopping trends caused by poor weather conditions depressed revenues for many industry players.

Walgreen and Rite Aid reported growth of 7.6% and 5% in their respective comparable store sales in April. Gap reported a higher increase of 9% in its comps for April, compared to 7% reported last month. Gap stated that its Old Navy brand, which registered an 18% increase in comps, led the growth. Old Navy saw its comparable store sales grow by just 9% in the same month last year.

L Brands reported that its comps increased 8% in April. The company raised its profit outlook for the quarter. On the other hand, Zumiez announced that its comparable store sales increased 8.2%, higher when compared to the 4.6% increase during the same period last year.

Also read our detailed analyses of Hypermarkets and Super Centers industry and The Gap Inc.

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