Why Today's Costco Share-Price Decline Is a Mistake
Let’s cut through the likely confusion with the November sales report and explain why the move isn't warranted.
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Last night, Costco (COST) delivered its November sales report. Sales for the month tallied $23.64 billion, up 8.1% year over year. For the 13-week period ending November 30, total sales rose 8.2%, year over year, to $71.97 billion.
Things are a bit wonky for two reasons.
First, when Costco reports its quarterly results next week, it will be doing so for the 12-week period that ended on November 23. A glance at the calendar tells us that it is before the Thanksgiving holiday shopping weekend, which means those sales will be captured in the current quarter. For the 12-week period ending November 23, Costco’s total sales came in at $65.98 billion, up 8.2% year over year.
Second, COST shares are trading off this morning because some folks are likely looking at that $65.98 billion figure and comparing it to the market consensus revenue forecast of $67.05 billion for the company’s November quarter. The problem with that is Costco’s reported sales figures DO NOT INCLUDE membership fee revenue. That line item has averaged $1.33 billion over the last four quarters, and when we add that to the company’s 12-week revenue, Costco’s total November revenue looks more like $67.3 billion or so.
Why did Costco close its quarter on November 23 this year and November 24 last year? I suspect we may hear about this on the upcoming earnings call, but we can say the company has been doing this consistently over the years.
What we saw inside the rest of the November sales report reaffirms our view that Costco continues to take consumer wallet share. That includes the adjusted U.S. comp sales that were 5.8%-5.9% across the reported 4, 12, and 13-week periods. Digital shopping over the same periods was in up high teens on a percentage basis. And Costco continued to benefit from its positioning in fresh foods, which was up in the mid-to-high single-digit range, and food and sundries, which was also up in the mid-to-high single-digit range, similar to last month.
Let’s Put It All Together
And as we think about all this, let’s also keep in mind that for Costco’s November 2024 quarter, its adjusted comp sales were up 5.2% overall and for the U.S. This means, on top of tough year-over-year comps, Costco continues to take wallet share.
While we agree that Costco ending its November quarter on November 23 is going to confuse folks, those focused on the 12-week $65.98 billion revenue figure and equating it to total November quarter revenue are mistaken. That’s what is contributing to the move lower in COST shares this morning.
We recently added shares to the Pro Portfolio near $883, and that left us with a sizable position. While we are not buying more today, we see this mistaken move lower as another opportunity for folks who missed that last move to add COST shares.
At the time of publication, TheStreet Pro Portfolio was long COST.
