Goldman Raises PT On Costco

Goldman Sachs has published a research report on Costco Wholesale COST as the company is showing sales growth and profitability potential in its 1Q. In the report, Goldman writes "Key highlights from the call that re-affirm our BUY thesis: Sales – traffic growth continues to drive comps, but ticket increased towards the end of the quarter as budding inflation is being passed through to the customer. Additionally, membership fee growth remains robust as renewal rates surpassed 88%, higher than any other period. Margins – core merchandise margin expanded 19 bp despite modest inflation in food & sundries and 3% inflation in fresh foods. Expenses – excluding the impact from the Mexico JV, COST saw 10 bp of leverage on operating costs (vs. 2 bp last quarter) as 16 bp of payroll leverage was partially offset by higher benefits expenses. With the results improving and a catalyst still on the horizon (potential fee increase), we continue to see a favorable risk/reward and maintain our Buy rating." Goldman maintains its Buy rating and has increased the price target on Costco from $71 to $77. Costco Wholesale closed yesterday at $69.25.