Despite a mostly upbeat and steady outlook for the rest of the year, Costco shares are sliding once again due to various analysts pointing out the possibility of the stock declining anytime.
Last week, Costco posted their fourth quarter earnings report that failed to assure investors over its recovery and growth in the next couple of quarters. Shares of Costco were down by around 6% cutting around $4.5 billion from its value last week despite reporting earnings of $2.08 per share beating last year’s earnings of $1.77 from the same quarter of $1.77 and higher than most analyst forecasts of $2.03 earnings per share.
The revenue of the warehouse retailer also was considerably higher at $42.3 billion from the same period last year at $36.6 billion and also beat most estimates of $41.8 billion. Costco’s same-store sales have also jumped by 6.1% during the quarter.
Although major numbers beat most estimates, the membership-based grocery giant posted a decline in their gross margin for the quarter which is driven by the growing competition from other companies who has been increasing their offerings to customers. Amazon, for example, whose online presence have risen in the past couple of months have recently acquired Whole Foods that led to Amazon offering cheaper grocery product prices.
Costco shares are currently under pressure with even officials from the company acknowledging the growing competition along with the growth of consumers signing up for membership not moving at their anticipated pace. Costco have also increased its annual membership fee.
However, the grocery chain has been also increasing its efforts into making sure that it doesn’t get left behind. The company has announced recently its new online delivery system that is expected to increase consumers.
The company which is currently one of the biggest retail companies in the U.S. has been given a price target of around $173 to as much as $205. The shares of the company are currently trading at around $154.61. Their shares have lost around 7% following Amazon’s Whole Foods acquisition.
During their earnings call, Costco also unveiled its plans to offer two-day grocery delivery services which was received positively well by a number of analysts stating that it would attract more buyers from a wide demographics. The announcement also can compete with Amazon’s Prime membership offering which has been getting a lot of attention lately. Despite this, analysts have warned against the possible risks that might affect the direction of the stock price in the following trading sessions.
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