Costco has multiple levers of growth at its disposal, which should lead to a further boost in the stock even after its already impressive year-to-date gains. Shares dropped more than 2% on Friday despite the warehouse retailer’s after-the-bell quarterly beats on earnings and revenue. The stock closed Thursday’s regular session at a record high of just over $815. In 2024, Costco has gained 20% — more than double the S & P 500 ‘s advance and well above the 6% increase in the consumer staples sector over the same stretch. “If you’re disappointed, go to another stock,” Jim Cramer said during Friday’s Investing Club’s Morning Meeting . Jim said investors should not be concerned about the pullback because the stock often drops the day after earnings. “There’s nothing wrong with Costco whatsoever. It was a perfect quarter.” COST 1Y mountain COST 1-year stock performance. In addition to exceeding estimates on the top and bottom lines in its fiscal 2024 third quarter, Costco turned in a better-than-expected 6.5% comparable sales increase. Gross margins of 10.84% slightly missed the mark but still increased 52 basis points, or 0.52 percentage points, on a reported basis and 54 basis points excluding gas inflation. An area of growth discussed on the post-earnings conference call was e-commerce business. CEO Ron Vachris and CFO Gary Millerchip — both new to their respective positions — highlighted the need to invest in technology and alternative revenue streams, including digital advertising to monetize online traffic like Amazon and Walmart have done. Millerchip was CFO at Kroger before joining Costco in March. Vachris, who has spent the past 40 years in various roles at Costco, assumed the CEO post in January. In fiscal Q3, e-commerce sales grew 20.7% year-over-year driven by appliances, precious metals like gold and silver, and gift cards. This strength shows “COST is taking share in these areas online due to increased marketing and improved delivery with their Costco Logistics integration,” D.A. Davidson said in a research note Thursday. Warehouse store expansion in the U.S. and international markets is another growth opportunity for Costco. For the rest of fiscal year 2024, management said they plan to open 12 new locations – nine in the U.S., two in Japan, and one in Korea. Altogether that would be 28 new locations this fiscal year. Millerchip said he anticipates, somewhere between 25 to 30 new warehouses per year long-term. Store traffic during the quarter grew both globally and in the U.S. — up 6.1% and 5.5%, respectively. That was stronger than growth in the prior quarter. Redburn said in a Friday note that new warehouse growth internationally is where most of Costco’s markets are “still meaningfully underpenetrated” and added the strength of existing warehouses is “the main driver of membership growth.” Back in January, as longtime CFO Rich Galanti was getting ready to retire, he said that China holds “very good potential” for…
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