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Costco Stock Higher After Q1 Report: What Wall Street Is Saying

The warehouse club reported strong first-quarter results.
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Costco Wholesale  (COST) - Get Costco Wholesale Corporation Report shares are higher after the Issaquah, Wash., warehouse-club retailer reported for its fiscal first quarter ended Nov. 21.

Here's a sampling of Wall Street commentary on the company and its outlook.

Jefferies (Outperform, Price Target $606 Affirmed)

“It's no surprise that [comparable sales] remain robust given COST's attractive club model, but we believe management is also outperforming on other key measures. … renewal rates up [0.3 percentage point], adjusted gross margin percentage expanding nicely on a two-year basis. …

“We find management’s ability to control [selling, general and administrative costs amid an inflationary environment quite impressive, reinforced by the company's superior wage framework vs. other retailers. …

“Customers are shopping stores at elevated levels, while e-commerce remains strong and well above pre-pandemic levels. New e-commerce initiatives include kiosks, storage lockers … and expanding the Costco Next program, which features an online offering of curated items … at discounted prices (up to 20%+).”

DA Davidson (Neutral, Price Target Up to $525 From $423)

“COST put up another great quarter including double-digit comps … as well as greater than expected leverage, which offset a slightly lower than expected gross margin. Membership trends were also strong. ...

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“Still experiencing significant delays … 79% of import containers are late, by an average of 51 days. ...

“Some out-of-stocks, but COST is mitigating – sales would have been better in some areas if they were able to get the product, but shelves are well-stocked, in some cases with substitute goods. ...

“Inflation is worse than expected – the impact to sales was 4.5% to 5.0% which was higher than the 3.5%-4.5% expectation.

“But there are some signs of moderating – food and sundries and fresh food were called out as areas where increases have moderated, although COST does expect more hikes after the first of the year.”

BMO Capital Markets (Outperform, Price Target Up to $560 From $550)

“Costco's [Q1] earnings started off strong, supported by upside from membership fee income and solid SG&A leverage. We continue to believe that COST remains well-positioned into 2022 and beyond.

“Given continued strength in key membership statistics, which have accelerated significantly compared to pre-Covid trends, we raise our target price to $560. …

“COST should benefit from … more exposure to higher-end consumers, where we believe spending tailwinds could remain stronger; [potential membership fee raise ... possibly late 2022]; expanding omnichannel features; [and] the high inflationary environment … as consumers recognize Costco's extreme value.”