Optimistic Outlook On Costco: Analyst Forecasts Robust EPS Growth And Digital Sales Surge

Telsey Advisory Group analyst Joesph Feldman reiterated an Outperform rating on the shares of Costco Wholesale Corporation COST with a price target of $575.

Costco will report August sales after

the markets close on Wednesday, August 30.

The analyst forecasts a total comparable sales of 2.4 versus 10.1% last year. Excluding

a projected net gas and FX headwind of ~60 basis points, core merchandise

comparable sales are expected to be 3.0% versus 8.7% last year.

In August, gas prices decreased in the low-single-digit, which the analyst estimated should negatively impact the total comp by ~20 basis points.

August traffic is seen to be up 5.5% on top of 5.6% last year, offset by an average ticket decrease of 3.1%, reflecting lower discretionary spending.

The analyst projected a digital sales increase of 5.0% versus up 3.9% last year, with growth being affected by mix being skewed toward bigger ticket discretionary items, such as furniture and electronics.

The analyst expects Food & Sundries and Fresh Foods to outperform and Non-Consumables to underperform.

The analyst sees Costco to remain a share gainer, with its value-focused merchandising and high member loyalty.

In FY23 and FY24, Costco should continue to generate high-single-digit to low-double-digit EPS growth, driven by a low-single-digit to mid-single-digit comp, mid-single-digit to high-single-digit membership fee income growth, leverage of customer data, and

effective management of merchandising and costs, said the analyst.

Price Action: COST shares are trading lower by 0.06% at $535.68 on the last check Monday.