COST - Embedded Expectations Analysis - 2020 02 12
Costco Wholesale Corporation (COST:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings, with a 34.5x Uniform P/E, implying bullish expectations for the firm. However, management may be concerned about sales volume, their Chinese operations, and marginsSpecifically, management may lack confidence in their ability to continue improving margins, sustain revenue growth, and maintain renewal rates. Additionally, they may be concerned about weakness in their electronics department, the progress of their Nebraska chicken plant production and processing capacity initiatives, and their ability to handle volume increases from their buy online pick-up in-store initiative and a shortened holiday season. Furthermore, they may be exaggerating the value of their products and furniture, and the sustainability of success in their China operations. Finally, they may be downplaying concerns about macro pressures
Costco Wholesale and its subsidiaries are principally engaged in the operation of membership warehouses based on the concept of providing its members low prices on a selection of nationally branded and private-label products. The company's merchandise are: food and sundries, which include dry foods, packaged foods, and groceries, snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies; hardlines, which include appliances, electronics, health and beauty aids, hardware, and garden and patio; fresh food, which include meat, produce, deli, and bakery; softlines, which include apparel and small appliances; and ancillary, which include gas stations and pharmacy businesses.
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