Costco's October Sales Strength Shows Its Value Model Is Far From Fading

Core Insights - Costco Wholesale Corporation's October sales results highlight the effectiveness of its value-driven business model, with net sales increasing 8.6% year over year to $21.75 billion, supported by a 6.6% rise in comparable sales [1][8] - The company's strong member loyalty and positive value perception are evident, as shown by the renewal rates of 92.3% in the U.S. and Canada, and a global rate of 89.8% [2] Sales Performance - The impressive sales performance is attributed to product quality and everyday low prices, leading to high member retention, with total paid members increasing 6.3% to 81 million [2] - Online sales also saw a significant rise of 16.6% during the month, indicating a positive response to Costco's combination of convenience and affordability [4] Value Proposition - A key element of Costco's value proposition is the Kirkland Signature private label brand, which offers members a 15% to 20% price advantage over national brands of similar or superior quality [3] - The ongoing growth of Kirkland Signature penetration helps mitigate inflationary pressures, while Costco is also focusing on sourcing products closer to end markets to maintain competitive pricing [3] Competitive Landscape - Costco's share price has increased by 0.3% over the past year, contrasting with the industry's growth of 3.7%, while Dollar General shares have surged by 35.3% and Target shares have dropped by 42.6% [5] - From a valuation perspective, Costco's forward 12-month price-to-earnings ratio is 45.36, significantly higher than the industry average of 29.89 [6][9] Financial Estimates - The Zacks Consensus Estimate for Costco's current financial-year sales and earnings per share indicates year-over-year growth of 7.7% and 11%, respectively [10] - Current quarter estimates for sales are projected at $67.15 billion, with a year-over-year growth estimate of 8.04% [11]