Teresa Rivas explores the possibility of sustained retail sales in Barron’s, writing:
After the close of regular trading Wednesday, Costco Wholesale (ticker: COST) reported another month of double-digit comparable-sales growth. Comps climbed 14.5% in August, excluding fluctuations in gasoline and foreign exchange, while e-commerce sales soared more than 100%.
That is par for the course for the discount retailer, which put up similarly strong same-store sales in June and again in July. While the company got a boost from panic-buying in March, flat April sales had some investors worried that demand had simply been pulled forward, and wouldn’t rebound. Strong May results showed that wasn’t the case. And the fact that Costco’s comps have held steady above the 14% mark for three consecutive months shows that the trend has legs.
While some investors may have been concerned to see August levels dip from July’s robust 15.8% rate, the results were still strong, and included e-commerce sales that accelerated from the previous two months, even as more physical locations reopened.
Costco’s August report echoes similarly upbeat news from Target (TGT). The company reported strong second-quarter results on Aug. 19, and at the time management said that month-to-date same-store sales were up by percentages in the “low double digits.”
That helped Target’s stock pop, especially because the results contrasted with Walmart’s (WMT) just a day before. Walmart said July same-store sales were up just 4%, a deceleration from more than 9% in the quarter as a whole, which it blamed on the fact that most consumers had already spent their government stimulus checks, with no second round in sight.
Of course, it isn’t an apples-to-apples comparison, because Walmart didn’t provide August data. Still, both Costco and Target saw double-digit same-store sales growth for their most recent quarter as well. Target’s comps jumped 24.3%, while Costco’s were up 14.1%. Although Costco doesn’t report until later this month, it provided preliminary top-line results on Wednesday.
So although the sustainability of sales growth will remain a major question in retail—every great comp figure becomes a hurdle to pass the next year—continued strength in August should provide investors with some level of reassurance that, while consumers may be in a tight spot, the big essential retailers will likely continue to win. It is also reassuring that both saw broad-based gains, demonstrating that shoppers aren’t just buying low-margin food and sundries.
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