BUZZ-Street View: Costco's value lies in ability to withstand higher costs

Reuters
30 May
BUZZ-Street View: Costco's value lies in ability to withstand higher costs

** Retail chain Costco Wholesale COST.O missed analyst expectations for third-quarter profit and revenue on Thursday but said it would raise prices as a "last resort"

** With retailers dealing with higher costs due to shifting supply chains, rival Walmart WMT.N said it would have to start raising costs while Target TGT.N slashed its annual outlook

** Median PT of 39 brokerages covering the stock is $1,095 - data compiled by LSEG

MEMBERSHIP MODEL AND VALUE OPPORTUNITY SET COSTCO APART

** Morgan Stanley ("overweight," PT: $1,225) says results show COST is leveraging scale to offset inflation pressures, widen its price gap against competitors and capture market share through its "club model"

** "... market rewards quality and visibility, paying a premium for the stronger players that can power through tariff and macro headwinds and gain market share" - brokerage

** D.A. Davidson ("neutral," PT: $1,000) says tariffs present a value opportunity for the co; even after passing on costs if needed, the co will likely have a wider price gap compared with competitors

** Gordon Haskett ("buy," PT: $1,200) says Costco lowered prices when possible leading to "a halo effect"

** Telsey Advisory Group ("outperform," PT: $1,100) says COST's growth through measures including opening new clubs, lowering everyday items prices, extending gas station hours and enhancing digital functions make it even more relevant to members

(Reporting by Twesha Dikshit)

((Twesha.Dikshit@thomsonreuters.com))

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