Costco's (COST) - Get Costco Wholesale Corporation Report second-quarter results are likely to showcase just how strong the business is at a time when the broader retail sector is getting hurt left and right by Amazon (AMZN) - Get Amazon.com, Inc. Report .
Historically, Costco, which has warehouses across the globe and generates the majority of its income from its membership fees, has been seen as Amazon-proof, but that wasn't always the case, with the company experiencing a rocky start to fiscal 2016. That mindset has changed though, as consumers realize the added benefit of shopping in the warehouses.
"In our view, COST has carved out its turf in an increasingly online-encroached world (and growth-scarce consumer retail/staples world) through its value-leadership with a limited assortment of great merchandise in large pack sizes at unbeatable prices in a treasure hunt atmosphere," JP Morgan analyst Christopher Horvers penned ahead of earnings.
Looking at the actual results, investors are expecting to see continued strong sales at existing warehouses, while also potentially seeing the benefits of its deal with Visa (V) - Get Visa Inc. Class A Report after eschewing American Express (AXP) - Get American Express Company Report as the sole credit card provider for Costco.
Piper Jaffray's Sean Naughton is expecting that Costco saw corp same-store-sales growth between 3% and 5%, excluding gas and foreign exchange.
There also may be some concerns about food deflation hurting sales, but that shouldn't impact positive sales growth. "Regardless, we believe Costco will continue to outperform given the strong traffic and better comp and EPS growth trend," Naughton added. Piper Jaffray rates Costco shares overweight with a $200 price target.
JP Morgan's Horvers also noted that Visa may help boost earnings, highlighting three times more households have a Visa card than an American Express card, which could help with frequency and margins.
In addition, investors will also be looking to get any hints on when Costco is likely to raise its membership fee.
Analysts surveyed by Yahoo! Finance expect the company to earn $1.36 a share on $29.86 billion in revenue for the second quarter.
Over the past 12 months, shares of Costco gained nearly 18% excluding dividends, compared to the near 25% gain in the S&P 500.
Here are five ETFs that may benefit if investors like Costco's second-quarter results.
VanEck Vectors Retail ETF
Deutsche Bank analyst Paul Trussell is expecting earnings estimates to be lower than the Street forecasts, mostly due to gross margin pressure from higher gasoline sales. He also expects February same-store-sales to be at 4%, compared to 4.6% from Wall Street.
Consumer Staples Select Sector SPDR Fund
The $8.29 billion has Consumer Staples Select Sector SPDR Fund (XLP) - Get Consumer Staples Select Sector SPDR Fund Report has Costco make up 4.05% of its portfolio, charging investors an expense ratio of 0.15%.
Piper Jaffray's Naughton is forecasting that Costco will continue to perform well, due to continued strong traffic and earnings growth in fiscal 2017 and 2018. "Given the faster comp growth and our expectations for that trend to continue, we've raised our Q2 comp estimate to 4% from 3%. 5% comp growth isn't out of the question should February results come in at the high end of our expectations," Naughton wrote ahead of earnings.
Recon Capital USA Managed Risk ETF
The $2.5 million Recon Capital USA Managed Risk ETF (USMR) has Costco make up 3.73% of its portfolio, charging investors an expense ratio of 0.50%.
JP Morgan's Horvers, who has an overweight rating and a $190 price target, expects that come the summer time, Costco will move past some tough headwinds, providing an earnings boost for the second half of the year.
FIDELITY MSCI CONSUMER STAPLES INDEX ETF
The $232.5 million FIDELITY MSCI CONSUMER STAPLES INDEX ETF (FSTA) - Get Fidelity MSCI Consumer Staples Index ETF Report has Costco make up 3.6% of its portfolio, charging investors an expense ratio of 0.08%.
Vanguard Consumer Staples ETF