[Overseas Stocks Spotlight] "Costco, Unshakable Strength Despite COVID-19"

[Asia Economy Reporter Eunmo Koo] Costco Wholesale (COST US) demonstrated solid fundamentals despite the impact of the novel coronavirus (COVID-19), achieving strong results in the fourth quarter of fiscal year 2020 (May 10 to August 30). All fundamental indicators, including same-store sales growth, membership numbers, and renewal rates, were evaluated as robust.

In the fourth quarter of fiscal year 2020, Costco's sales and earnings per share (EPS) exceeded consensus estimates by 2.4% and 10.2%, respectively, positively influenced by increased demand due to COVID-19. The overall same-store sales growth rate was 14.1%, with regional figures of 13.6% in the United States, 12.6% in Canada, and 18.8% in other overseas regions, marking record highs. Analyst Hanju-gi from Samsung Securities explained in a report on the 27th, "The main reason was a 12.7% increase in average purchase amount, while purchase frequency actually decreased by 1.2% compared to the previous year."

By product category, fresh foods were the core driver of sales growth, with groceries, softlines, and hardlines all remaining solid. Conversely, the ancillary business segment, which includes gas stations and food courts, saw a decline in sales due to business suspensions and deteriorating gas station performance. Meanwhile, as the proportion of ancillary business sales decreased, the gross profit margin improved. E-commerce same-store sales growth reached a record high of 91.3%, driving overall growth.

The customer base continued to expand. As of the end of the fourth quarter, membership households totaled 58.1 million, an increase of 2.3 million households from the previous quarter, and the number of cards reached 106 million, up by 3.7 million cards from the previous quarter. Analyst Han noted, "Although the method of counting membership numbers was changed during the fourth quarter, resulting in a net increase of 1.3 million households and 2 million cards, even excluding this, the net increase compared to the previous quarter was at an all-time high." He added, "Membership renewal rates remained at record highs, with global rates at 88.4% and U.S. and Canada rates at 91.0%." Additionally, eight new stores were opened during the fourth quarter (five in the U.S., one in Canada, one in Japan, and one in Spain), bringing the total number of stores to 795.

Given the sound fundamentals, the medium- to long-term growth potential remains attractive. Analyst Han stated, "As economic activities gradually normalize, store visit traffic (4.5% in July and 3.1% in August in the U.S.) is recovering to pre-COVID-19 levels." He noted, "Although recent U.S. stimulus packages directly benefited large offline retailers, the effect diminished after August, and uncertainties remain regarding additional stimulus measures, which pose risk factors." However, he added, "It is important to focus on the medium- to long-term market dominance growth based on a differentiated business model and strong fundamentals rather than short-term uncertainties."

This content was produced with the assistance of AI translation services.