Should one Invest, Sell, or Maintain current holdings in Costco stock by 2025?
In a testament to its resilience and popularity, Costco Wholesale Corporation has reported impressive results for the third quarter of 2022. The retail giant's earnings per share have soared by 13%, reaching an impressive $4.28. This growth is accompanied by a 8% increase in sales, totaling nearly $62 billion.
A key factor in Costco's success is its membership model. The majority of the company's revenue comes from these membership fees, and high loyalty among members is a significant strength. In both the U.S. and Canada, Costco's membership renewal rates stand at an impressive 93%.
Costco's discount warehouses are a popular destination for shoppers seeking deals on various items, including electronics, back-to-school clothes, and groceries. The company's groceries are 9.5% cheaper than comparable Walmart groceries, offering significant savings to customers.
The strong brand resonates with Costco's customers, and the success of the Kirkland Signature brand, as emphasized by CEO Ron Vachris, is a testament to this. Costco's stock remains a popular investment among investors, with its price having increased by 178% over the past three years, outperforming the S&P 500's gains.
Approximately one-third of Costco's members have a household income above $100,000, indicating a strong and affluent customer base. The expansion of store locations is likely to result in more membership growth, with Costco planning to open 27 new locations this year, bringing the total to 914 warehouses worldwide. Each new store potentially brings thousands of new memberships.
Costco's e-commerce business has also seen growth, with a 16% increase in the first 12 weeks of the year. The exact locations of the 27 new Costco Wholesale warehouses to be opened this year are not yet known.
Analysts expect Costco's earnings to continue to rise, with predictions of approximately $18 per share for 2025, representing a nearly 12% increase from 2024. Costco's strong performance and continued growth indicate a bright future for the wholesale giant.
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