JPMorgan Sees More Upside For Costco As US Sales, E-Commerce Outperform

J.P. Morgan analyst Christopher Horvers on Thursday reiterated a Overweight rating on the shares of Costco Wholesale Corp COST and raised the price target from $1070 to $1088.

Costco's U.S. core comparable sales rose 7.1% in April, surpassing expectations despite a calendar-related sales headwind from the Easter shift, said the analyst.

U.S. store traffic climbed 5%, while total global traffic increased 4.2%, and the average transaction size grew 2.4% year-over-year.

However, core sales in Canada and other international markets underperformed versus projections. The strongest U.S. regions were the Midwest, Northeast, and Southeast, while internationally, Mexico, Korea, and Taiwan led performance.

E-commerce sales jumped 13%, excluding currency effects, noted the analyst.

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Costco shared several key insights on recent sales trends. First, the company observed less early demand pull-forward in non-food items in April compared to March, particularly in electronics, while noting strength in upholstered furniture and continued share gains in appliances, aided by its home delivery expansion.

The negative impact from the Easter timing shift was smaller than anticipated, estimated at around 1.5–2.0 percentage points.

Second, in response to high beef prices, consumers are trading down to lower-cost cuts, a behavior that Costco previously flagged; however, the pricing pressures are not as disruptive as earlier egg inflation.

Lastly, softer results in Canada and other international markets were attributed mainly to inflation and broader macroeconomic pressures, with only minor concerns about anti-American sentiment, the analyst asserted.

The analyst highlighted COST’s strong global momentum, market share gains, and exposure to a rebound in big-ticket items, which make up about 20% of its core sales.

The company is also beginning to benefit from new advertising revenue streams. Costco's consistent international success and dominant warehouse club model position it as a top performer in the retail sector, rivaling the best companies across consumer categories.

According to the analyst, the company remains a high-conviction investment pick.

Price Action: COST shares traded higher by 0.31% at $1010.70 at last check Thursday.

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