Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Costco (COST), and suggests that while the average brokerage recommendation (ABR) indicates a favorable outlook, investors should exercise caution and consider additional analysis tools like the Zacks Rank for better investment decisions [1][5][10]. Brokerage Recommendations - Costco has an average brokerage recommendation (ABR) of 1.95, which is between Strong Buy and Buy, based on recommendations from 33 brokerage firms [2]. - Out of the 33 recommendations, 15 are Strong Buy (45.5%) and 4 are Buy (12.1%) [2]. Limitations of Brokerage Recommendations - Studies indicate that brokerage recommendations have limited success in guiding investors towards stocks with the best price increase potential [5]. - Brokerage firms often exhibit a strong positive bias in their ratings due to vested interests, leading to a disproportionate number of Strong Buy recommendations compared to Strong Sell [6][10]. Zacks Rank as an Alternative - The Zacks Rank categorizes stocks into five groups based on earnings estimate revisions, which have shown a strong correlation with near-term stock price movements [8][11]. - The Zacks Rank is distinct from the ABR, as it is a quantitative model based on earnings estimates rather than solely on brokerage recommendations [9]. Current Earnings Estimates for Costco - The Zacks Consensus Estimate for Costco's earnings for the current year remains unchanged at $17.97, indicating steady analyst views on the company's earnings prospects [13]. - The recent consensus estimate change, along with other factors, has resulted in a Zacks Rank of 3 (Hold) for Costco, suggesting a cautious approach despite the favorable ABR [14].

Group 1: Inflation Impact on Retail - Inflation has been a significant issue for consumers in recent years, with rates hitting 2.7% as of June [3][5] - Historical data shows that the S&P 500 performs best when inflation is between 2% and 3%, with higher inflation potentially leading to increased interest rates that can negatively impact stock valuations [2] - Costco Wholesale, a leading big-box retailer, has seen its stock return over 200% in the past five years, outperforming the broader market [3][6] Group 2: Costco's Business Model - Costco operates on razor-thin margins, primarily generating profits from membership fees rather than product sales [4] - As one of the largest retailers, Costco can source goods at lower costs, allowing it to maintain competitive pricing even during inflationary periods [5] - The company attracts consumers looking for deals, but excessive inflation could still negatively affect sales, particularly of discretionary items [5][6] Group 3: Financial Performance and Valuation - Costco's sales for July 2025 reached $20.89 billion, reflecting an 8.5% increase from the previous year [6] - The company's price-to-earnings (P/E) ratio has increased from about 40 five years ago to 55 today, indicating a significant rise in valuation [8] - Analysts project Costco's earnings will grow at an annualized rate of 9% over the next three to five years, resulting in a PEG ratio of approximately 6.0, suggesting the stock may be overvalued relative to its growth potential [10] Group 4: Future Outlook - The stock's current valuation may lead to a reversion towards long-term norms, especially if inflation continues to rise and discretionary spending is squeezed [12] - Despite concerns about short-term prospects, Costco is expected to remain a strong business in the long term [13]

Recurring theme from retailers that have reported thus far. Some have raised prices because of it, including ELF last week. The National Retail Federation warning last week that the direct result of tariffs will be higher prices and fewer capital expenditures.But my next guest is staying positive into earnings. Joining me now is Chris Horver, retail analyst at JP Morgan. Chris, it's great to have you on the show.And let's start right there. What what is sparking the positivity. Well, it's a little bit of wh ...

Core Insights - Costco Wholesale Corporation (COST) demonstrated steady sales growth in July 2025, with comparable sales increasing by 6.4% year over year, following increases of 5.8% in June and 4.3% in May, indicating sustained momentum [1][8] - The growth was broad-based across regions, with U.S. comparable sales up 5.5%, Canada up 7.6%, and Other International markets up 9.5%. Adjusted for gasoline prices and foreign exchange, U.S. comps increased 6.5%, Canada jumped 9.1%, and Other International rose 7.5%, leading to a total company gain of 7% [2][8] - E-commerce sales saw a significant increase of 15.1%, reinforcing Costco's multi-channel growth strategy, building on previous months' gains of 11.5% in June and 11.6% in May [3][8] - July net sales rose 8.5% to $20.89 billion from $19.26 billion a year earlier, with total net sales for the first 48 weeks of fiscal 2025 reaching $248.35 billion, up 8.1% from the prior year [4][8] Competitor Analysis - Dollar General Corporation (DG) reported a 2.4% increase in same-store sales for the first quarter of fiscal 2025, driven by a 2.7% rise in average transaction amounts, despite a 0.3% decline in customer traffic. The company expects same-store sales to rise between 1.5% and 2.5% [5] - Target Corporation (TGT) experienced a 3.8% decline in comparable sales in the first quarter, attributed to a 5.7% fall in comparable store sales, offset by a 4.7% increase in comparable digital sales. Traffic dropped 2.4%, and average transaction amounts decreased 1.4% [6] Financial Metrics - Costco's stock has outperformed the market, with shares rallying 13.6% in the past year, compared to the industry's growth of 10.7% [7] - The forward 12-month price-to-earnings ratio for Costco stands at 49.49, higher than the industry average of 32.85, indicating a relatively high valuation [9] - The Zacks Consensus Estimate for Costco's current financial-year sales and earnings per share implies year-over-year growth of 8.1% and 11.6%, respectively [10]

Group 1 - Costco Wholesale Corporation is experiencing quiet trading, but a popular trading model has generated a 'buy' signal, indicating a potential new uptrend [1] - The recent trend analysis shows that the 10-day average closing price has surpassed the 20-day average closing price, suggesting a possible upward movement for Costco [7] - Trend-following strategies are being utilized to determine entry and exit points based on specific price analyses [1][2] Group 2 - A moving average crossover model indicates that when the shorter-term average (10-day) is below the longer-term average (20-day), the stock is in a downtrend, and a crossover generates a buy signal [6] - Historical data shows that previous buy signals in January and April were accurate, followed by sell signals in March and June [6] - The current situation may signal the beginning of a new uptrend for Costco, as indicated by the recent price movements [7]

Core Viewpoint - The retail landscape in China is shifting towards hard discount models, with traditional membership-based supermarkets facing challenges and closures, indicating a potential decline in the middle-class consumer illusion [2][7][12]. Group 1: Market Dynamics - Costco's entry into China six years ago highlighted the potential of middle-class consumption, leading to a surge in membership-based retail models [2]. - The acquisition of Metro China by Wumart exemplifies the struggle of foreign brands in China and the ongoing evolution of traditional supermarket brands [2]. - Wumart is now focusing on hard discount models, learning from successful international brands like Aldi [2][4]. Group 2: Hard Discount Model Emergence - Wumart's hard discount brand "Wumart Super Value" has opened its first six stores in Beijing, filling a market gap in northern China [3]. - Competitors like Meituan and JD are also entering the hard discount space, indicating a growing trend among major players [4]. - The hard discount sector is expected to become highly competitive, resembling a "street war" among retailers [5]. Group 3: Performance of Key Players - Hema's X membership stores have expanded rapidly, but face challenges with a low membership renewal rate of 62% in China compared to over 90% globally for Costco [7]. - Aldi has successfully penetrated the Chinese market, achieving a sales figure of 2 billion yuan in 2024, despite only a slight increase in store count [9]. - Hema NB has outpaced Aldi in store openings, leveraging a franchise model and community pickup stores to enhance its market presence [9][12]. Group 4: Supply Chain and Profitability Challenges - The hard discount model operates on low margins, with typical gross margins between 10% to 15%, posing significant profitability challenges [17]. - Successful players in the hard discount sector are focusing on supply chain efficiencies, often relying on private label products to maintain competitive pricing [18]. - Aldi's private label products account for 90% of its offerings, establishing a price advantage over competitors [18]. Group 5: Industry Trends and Future Outlook - The community discount sector in China has substantial growth potential, with current market penetration below 10% compared to over 30% in developed countries [15]. - The hard discount sector is becoming a focal point for major retailers, with a trend of mimicking successful models rather than innovating [21]. - The competitive landscape is intensifying as major players leverage their financial strength and brand recognition to dominate the market [26].

Core Insights - Costco operates a unique business model that requires customers to pay a membership fee for access, which significantly impacts its revenue structure and customer loyalty [1][3] - The membership renewal rate is a critical metric for Costco, typically around 90%, providing a stable annuity-like income stream [4][8] - Despite generating approximately $63.2 billion in total revenue in the fiscal third quarter of 2025, only about $1.2 billion, or less than 2%, came from membership fees [5] Revenue and Cost Structure - Membership fees contribute significantly to Costco's gross profit, accounting for around half of it, despite being a small portion of total revenue [8] - The cost of goods sold in the same quarter was nearly $55 billion, with additional operational costs of approximately $5.7 billion, leading to a gross profit of about $2.5 billion [7] - Membership fees have minimal associated costs, allowing them to flow directly into gross profit, enhancing the overall profitability of the company [6][8] Business Strategy and Customer Focus - Costco's membership model allows for lower margins on product sales, which helps maintain customer satisfaction and loyalty [9] - The company emphasizes strong employee relations to ensure high levels of customer service, reinforcing its focus on customer happiness as a means to drive membership renewals [10]

Core Insights - Hema has decided to abandon its membership store format, with the last Hema X membership store in Shanghai set to close on August 31, 2024, following the closure of seven other membership stores this year [4][5][6] - In contrast, Sam's Club and Costco are rapidly expanding their membership store presence in China, with Sam's Club reporting a 40% increase in membership revenue in the latest quarter [4][10] - Hema's shift away from the membership model reflects a strategic focus on its fresh food and discount store formats, aiming for profitability and resource concentration [7][8] Hema's Membership Store Closure - Hema's last X membership store will cease operations, marking the end of its high-end membership store format [6] - The closure of Hema X membership stores has been ongoing, with three stores closed earlier this year and additional closures in June and July [5][6] - Hema's decision to close these stores is part of a broader strategy to focus on Hema Fresh and Hema NB formats, with plans to open nearly 100 new Hema Fresh stores in the coming fiscal year [4][7] Comparison with Competitors - Sam's Club has significantly increased its store count in China, reaching 53 locations by 2024, and has seen strong performance in membership revenue [4][9] - Costco, which opened its first store in mainland China in 2019, is also expanding its footprint, with plans to continue opening new locations [9] - Hema's membership model faced challenges due to insufficient supply chain capabilities and a lack of unique products, leading to its decision to pivot away from this format [8] Financial Performance - Walmart reported a 22.5% year-on-year increase in net sales in China, with Sam's Club contributing to this growth through strong membership performance [10] - The membership fee for Sam's Club is comparable to Hema's, with ordinary and premium memberships priced at 260 yuan and 680 yuan respectively [9] - Hema's membership fees were 258 yuan for gold members and 658 yuan for diamond members, but the value proposition did not meet consumer expectations [7][9]

Core Insights - The closure of Hema X membership stores marks the end of Hema's attempt to create a Chinese version of Sam's Club, with the first store opening in October 2020 and all stores closing within five years [1] - Hema X membership stores initially expanded rapidly, reaching ten locations and accumulating nearly 3 million members, generating over 500 million yuan in annual membership fees [1][2] - The strategic decision to close Hema X stores is part of a broader plan to focus on Hema Fresh and neighborhood businesses, as the membership model did not align with the new strategy [2] Hema X Membership Store Performance - Hema X membership stores faced challenges as they offered many of the same products as regular Hema Fresh stores but at higher prices, undermining the value of membership fees [2] - Attempts to lower prices to attract customers led to a deviation from the high-end membership positioning, ultimately resulting in the suspension of membership renewals [2] Competitor Analysis - Sam's Club remains a leader in the industry, with membership numbers exceeding 5 million and annual membership revenue surpassing 1.3 billion yuan, despite facing quality complaints [2] - Costco's cautious expansion in China reflects challenges such as high logistics costs and poor product adaptability, resulting in a membership renewal rate below the global average [4] Industry Challenges - The development of membership retail in China faces hurdles, including consumer perception of membership value, localization issues, and operational efficiency [6] - The rise of instant retail is challenging traditional membership models, pushing retailers to enhance online capabilities and instant delivery services [6] Future Directions - The membership retail sector in China needs to reconstruct its value system, accelerate supply chain localization and digitalization, and explore diversified membership services [8] - Hema's exit serves as a warning to other players in the industry to prioritize quality and service alongside expansion efforts [8]

Core Insights - Costco reported net sales of $20.89 billion for July, marking an 8.5% increase from $19.26 billion last year [1] - JP Morgan analyst Christopher Horvers raised the price forecast for Costco shares from $1,115 to $1,160, maintaining an Overweight rating [1] Sales Performance - Canada and Other International core comps outperformed expectations, with growth rates of 9.1% versus 5.7% and 7.5% versus 6.4% respectively [2] - U.S. growth was driven by the Northwest, Midwest, and Southeast regions, while Australia, Taiwan, and Mexico led international growth [2] E-commerce and Sales Strategies - E-commerce sales increased by 14.9% excluding foreign exchange impacts, with July's cannibalization headwind easing to 50 basis points [3] - The introduction of extra hours for executive members has contributed approximately a 1.5-point lift to comparable sales [4] Future Expectations - Horvers anticipates that Costco will detail the sales benefits versus operating costs in its fourth-quarter conference call in September, with potential acceleration during peak holiday shopping [5] - July's sales benefited from easier year-over-year comparisons due to past hurricanes and a consumer pause in late July 2024 [5] Market Position and Sales Trends - Non-food sales remained strong despite a two-year low in monthly gold bar growth, with comparison ease expected to continue beyond August [6] - Costco is recognized for its successful entry into every market it has entered, with its club model ranking just behind auto parts as a top-performing retail sector [6]