Why Costco Is the Perfect Stock for Inflation

Inflation and supply chain issues have cast a dark shadow over retail stocks. Never mind that people still need to eat even when prices go up, Target TGT stock has dropped 26.9% over the past month and Walmart WMT shares are down 16% during that same time period.

Those numbers reflect macroeconomic concerns not the actual results posted by either company. Still, it has been a very difficult climate for retail stocks with pretty much every major player trading at lower prices.

The reality is that the current market conditions actually benefit the biggest retailers. Walmart and Target have leverage when it comes to the supply chain. Both chains experienced problems — both with too much inventory and not enough in certain cases — but these were mild problems due to the huge buying power these chains have.

Costco (COST) – Get Costco Wholesale Corporation Report has also seen its stock price fall (down 11% over the past 30 days). That has nothing to do with the company’s actual results as it reported stellar third-quarter numbers.

Costco Wins on its Most-Important Numbers 

Costco grew its net income to $1.353 billion, or $3.04 per diluted share for the quarter, up from $1.22 billion or $2.75 per diluted share in the year-ago quarter. Net sales also continued to rise climbing 16.3% to $51.61 billion, compared to $44.38 billion reported last year in Q3.

“In terms of comparable sales for the third quarter, for the 12 weeks on a reported basis, the U.S. was better or up by 16.6%; Canada, better by 15.2%; Other International, up 5.7%; and total company, again, up 14.9%,” said Senior Vice President Bob Nelson during the Q3 earnings call.

Those numbers are nice, but they’re not what actually matters, Sales are a barometer of how happy members are with the warehouse club. When sales go up that’s a good sign, but the key numbers for the chain, when you judge its financial health, are membership retention and growth.

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“At  Q3 end, our U.S. and Canada renewal rate was 92.3%, up 0.3% from the 12 weeks earlier at Q2 end,” Nelson said. “And the…


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