Charlie Munger's Top Pick Costco Reports Strong December Sales: Analysts Expect A 7% Jump In January

Costco Wholesale Corp COST, a top pick by the late veteran investor Charlie Munger reported strong sales figures for December and is expected to post a 7% year-on-year jump in January 2025 core sales, according to the analysts at Telsey Advisory Group.

What Happened: Costco reported a 9.9% jump to $27.52 billion in net sales for the five weeks ended Jan. 5, as compared to $25.03 billion last year. This excluded the impact of changes in gasoline prices and foreign exchange.

However, this Munger favorite admired for its business model and unique approach to retailing is expected to report better sales in the coming months. Analysts at TAG expect Costco to “execute well in this uncertain operating environment.”

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The research note projects a January comparable sales of 5% as compared to 2.7% in January last year. According to them, the core merchandise comparable sales, excluding gas and forex price changes, will come in at 7% as compared to 3.4% last year during the same period.

Within the U.S., TAG expects a 6.5% increase in sales as compared to 2.2% a year ago, excluding forex and gas price change.

E-commerce sales in December were positively impacted by an estimated 15%, due to Thanksgiving, Black Friday, and Cyber Monday occurring a week later this year. However, TAG pegs it at 5% for January 2025, which is less than the 21% growth in the same month last year.

“In FY25, Costco should continue to generate solid EPS growth, driven by an MSD comp, membership fee income growth of HSD (including benefits from higher fees), effective management of merchandising and costs, and leverage of customer data,” said the note. TAG analysts maintain an ‘outperform’ rating with a 12-month price target of $1,100 per share given the healthy underlying trends.

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Why It Matters: "I love everything about Costco," Munger said during the Daily Journal's annual shareholder meeting back in February 2023. He died in November 2023 and had a seat on the retailer’s board till his death. This seat was first offered to Warren Buffett in 1997, which he declined, saying that retailing was a difficult business.

"I wish everything else in America was working as well as Costco does," Munger said in early 2022. "Think what a blessing that would be for us all."

In December, Costco reported first-quarter revenue of $62.15 billion, beating the consensus estimate of $62.08 billion. The membership-based retailer reported first-quarter adjusted earnings of $3.82 per share, beating analyst estimates of $3.79 per share, according to Benzinga Pro.

The stock rose 1.85% to $944.55 apiece in after-hours on Wednesday. It has risen by 4.57% over the last six months, outperforming the Nasdaq 100 index, which rose by 3.56% in the same period.

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According to Benzinga, Costco has a consensus price target of $1009.88 based on the ratings of 26 analysts. The highest price target out of all the analysts tracked by Benzinga is $1175 issued by BMO Capital as of Dec. 13, 2024. The lowest target price is $890 issued by Redburn Atlantic on Sept. 10, 2024.

The average price target of $1053.33 between Telsey Advisory Group, Citigroup, and Wells Fargo implies an 11.52% side for Costco.

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