Costco: Value in a shaky economy
Costco reports earnings on Thursday and predicts a profit of 65 cents with revenues of 16.33 billion for the quarter. The company continues to increase sales despite a tough economy because consumers are looking to buy in bulk to reduce costs. In store sales were up 8 percent in April, beating estimates of 6.1 percent. Recently, Dollar Tree Inc and Ralph Lauren have reported higher than expected earnings. Also, BJ’s wholesale, the third largest big-box seller behind Costco, saw solid earnings and raised guidance. Costco’s short-term looks favorable with the increased buying but its current price of 73 looks fairly high and the upcoming earnings may already be priced in. Inflation may also be hurting the profits. I have two recommendations. Shop at Costco to save a few bucks but wait for a pullback after earnings just like BJ’s to the 50dma and then look to get in.