Costco downgraded as members-only retailer faces higher sales hurdles

Investing News

Tougher sales comparisons and food price deflation at Costco will cut into performance in 2019, according to Citigroup, which downgraded the membership-only retailer to neutral on Monday.

Citi analyst Kate McShane expects Costco to be a “standout” next year, but notes that the retailer faces “challenging comps in the coming months at a time when food deflation is coming into play.” At the same time, the contribution from e-commerce sales is diminishing and “the headwind from cannibalization may be ticking back up,” she said.

Shares of Costco fell 1.2 percent Monday following the Citi note; The stock is up more than 23 percent so far this year. McShane also cut her 12-month price target on shares of Costco to $238 from $257, implying 2.9 percent upside over the next year.

For fiscal year 2019, which for Costco ends in August, Citigroup projects earnings per share of $7.72, up 8.6 percent year over year and below consensus estimates of $7.74.

Currency pressure could be a sustained challenge, while gasoline said could be a lower contributor to reported same-store sales growth. “This is occurring as Costco implements wage increases and continues to invest in price, potentially pressuring margins,” the analyst added.

Products You May Like

Articles You May Like

3 Reasons Disney Stock Could Rally in 2019
Verizon Stock Shows Its Mettle Is Solid In This Shaky Market
Trade deal with China could be elusive until bitter end of negotiating period
Federated Investors’ top fund manager thinks the market is wrongly pricing in a 2019 recession
In Tencent Music’s IPO, a sign that pricing is coming down to Earth

Leave a Reply

Your email address will not be published. Required fields are marked *