Costco's (COST, Financial) performance has been good of late, and it looks like the company should continue improving in the future. For instance, let’s start with Costco’s performance for the recent quarter and then move forward to its future prospects. Its total sales increased 7% to $25.2 billion from a year ago period of $23.5 billion. Similarly its net income also rose to $459 million compared to $173 million last year.
What can be expected?
The company experienced some headwinds during the quarter on account of weak foreign exchange rates and deflating gas prices. Had it not been for these minor setbacks, its comp would be higher than the present levels. However, this did not stop the retailer from expanding its horizons and added Spain to its existing fleet of retail stores.
As of now Costco operates 657 stores in different locations around the world and expects to increase this number to 663 by the end of the fiscal. The retailer plans to open 30 new stores this year, of which 17 would be in the U.S., three in Canada, one in the U.K., two in Korea, two in Japan, three in Australia and one each in Mexico and Spain. During the year it had to close its Acapulco location due to a tragic hurricane that damaged the entire store. But the company expects to offset this loss with its new store openings in the coming months.
During the quarter some of the product categories performed extremely well, which includes small electrics, domestics, apparel, fresh foods, office and automotive. It also experienced strong growth in its membership renewal rates and as the company is expanding its horizons the membership renewals will be strengthened further.
Improving its performance
Costco is also improving its e-commerce facilities, as this will help the retailer reach the unreached areas. Currently it operates Costco Online in four countries – the U.S., Canada, the U.K. and Mexico. To further enhance this feature it has also developed mobile apps, increasing its presence tremendously. Apart from this, Costco is working on new avenues to increase its reach. In this direction, it has partnered with Google shopping express as a pilot program. This new innovation has been tested in Los Angeles and Manhattan and is still under development, which might fuel its growth further.
Costco is also focused to deliver value to its shareholders. Consequently it has planned for a stock repurchase program and as of now it has bought more than 1.6 million shares at an average price of $113.14. Along with this the dividends rose 14.5% to $0.35 per share compared to $0.31 per share in the previous quarter. Going forward the management is confident of its future prospects, and its expansion strategies might just be the fuel to boost its growth.
Conclusion
Costco is making smart moves to get better. As a result, investors would do well to remain invested in the stock for the long run.
