Costco Wholesale Corp "Fueling the Moat" (Buy) Lasser

研报英文原文证据摘录

Costco Wholesale Corp "Fueling the Moat" (Buy) Lasser

Forecast returns

Forecast price appreciation 16.5%

Forecast dividend yield 0.5%

Forecast stock return 17.0%

Market return assumption 9.0%

Forecast excess return 8.0%

Company Description

Costco Wholesale Corporation operates membership warehouses in the US, Canada, the UK,

South Korea, Taiwan, Japan, Mexico, Australia, Spain, France, Iceland, and China. It recorded

revenue of US$167 billion in FY20. The company operates about 800 warehouses globally,

with about 27% of revenue generated outside the US. The warehouse club business model is

based on very low mark-up on products, with the majority of profits generated from

membership fees charged to customers. Costco derives roughly 75% of operating income

from membership fees received from its approximately 58 million paid-up members.

Valuation Method and Risk Statement

Our price target is based on a multiple analysis. Membership renewal rates falling would have

a direct negative effect on its income if it could not replace lost members with new members.

Competitive brick and mortar openings, increase competition from online retailers and price

competition could affect its performance. If Costco fails to evolve its retailing capabilities to

incorporate ecommerce, its sales and profits could be affected. Costco’s profits could be

affected by increased commodity prices, distribution costs and labor cost. Economic, political,

social and substitution risks could negatively impact both consumers and suppliers are risks

for the company. As Costco increasingly looks toward international markets for further

square footage expansion opportunities, country specific execution, foreign exchange, and

political risks become more acute. Because of its warehouse club business model, in