Costco Shares Jump After Better-Than-Expected June Sales Trigger Q4 Earnings Optimism

Costco reported an 86.7% surge in e-commerce activity over the month of June, helping sales rise more than 11% from last year to $16.2 billion.

Costco Wholesale Corp.  (COST) - Get Report shares jumped higher Thursday after the bulk discount retailer posted stronger-than-expected June sales that could support a bump in fourth quarter earnings. 

Costco said sales for the five weeks ending on July 5, which is books as the retail month of June, rose 11.1% from last year to $16.18 billion. That total lifted the 40-week revenue total to $136.37 billion, an 8.1% increase from the same period last year.

Same-store sales, Costco said, rose 14.4% on a global basis, paced by a 13.6% gain in the United Sates, where the company was one of the few domestic retailers that remained open during the whole of the coroanvirus pandemic lockdowns. E-commerce sales, Costco said, surged 86.7% from last year as customers used its 'buy online, pick-up in store' options to stock up on household essentials such as toilet paper, cleaning supplies and bulk food items.

Costco shares were marked 2.1% higher in pre-market trading Thursday to indicate an opening bell price of $322.98 each, the highest since April 17 and less than 1% from the all-time peak recorded on February 21.

"Traffic in the US grew for the first time since March ... and every merchandise category reported double-digit growth," said Loop Capital analyst Laura Champine, who boosted her price target on the stock by $20 to $360 per share and is now modelling for fourth quarter earnings of $2.82 per share.

"We believe the company's growth and stability in (membership fee increases) deserve modestly higher multiples than the current valuation of 31x F2021 earnings and 17x EV/EBITDA, and we expect the stock to appreciate as earnings are upwardly revised,' she added.

Costco said in late May that adjusted earnings for its fiscal third quarter fell 7.5% from last year to $1.89 per share and missed the Street consensus forecast by around a nickel as COVID-19 costs rose to $283 million, the equivalent of 47 cents per share. 

The group will publish fourth quarter earnings, comprising the three months ending in July, on September 24.