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Costco Wholesale Corp COST Stock Quote

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Morningstar‘s Stock Analysis COST

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Is it the right time to buy or sell?

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Costco’s Fiscal Year Ends As Solidly as We Had Expected, but the Shares Are No Bargain

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $454 per-share valuation of wide-moat Costco should not change materially after it announced fourth-quarter (ended Aug. 28) earnings that approximated our expectations. With the warehouse club’s ongoing resilience despite inflation (unsurprising considering the chain’s long record of  strong performance in a variety of economic environments), we see little reason to change our long-term expectations, which call for mid- to high-single-digit annual percentage revenue growth and operating margins approaching 4% over the next decade. While we continue to see Costco as one of the most competitively advantaged retailers worldwide, we suggest prospective investors seek a greater margin of safety (the shares were little changed in after-hours trading, trading modestly higher than our valuation.)

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Key Statistics COST

Company Profile COST

Business Description

The leading warehouse club, Costco has 815 stores worldwide (at the end of fiscal 2021), with most sales derived in the United States (72%) and Canada (14%). It sells memberships that allow customers to shop in its warehouses, which feature low prices on a limited product assortment. Costco mainly caters to individual shoppers, but roughly 20% of paid members carry business memberships. Food and sundries accounted for 40% of fiscal 2021 sales, with non-food merchandise 29%, warehouse ancillary and other businesses (such as fuel and pharmacy) nearly 17%, and fresh food 14%. Costco’s warehouses average around 146,000 square feet; over 75% of its locations offer fuel. About 7% of Costco’s global sales come from e-commerce (excluding same-day grocery and various other services).

999 Lake Drive
Issaquah, WA, 98027
T +1 425 313-8100
Industry Discount Stores
Most Recent Earnings May 31, 2022
Fiscal Year End Aug 30, 2021
Employees 288,000