3. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Investors: 71
Jim Cramer highlighted Costco Wholesale Corporation (NASDAQ:COST) as a unique retailer, ranking as the second-largest pure-play retailer in the country. He explained that Costco Wholesale Corporation (NASDAQ:COST) operates as a massive buying group for its members, offering exceptional prices, sometimes lower than what the store itself pays.
“Costco is like no other. It’s the second-biggest pure-play retailer in the country, and it functions basically as a gigantic buying group for its members who order pretty much everything. The membership gets you amazing prices, including some that are likely below what the store itself pays, like the bottles of wine I mentioned the other day and the gold bullion everyone is so crazy about.
Costco is a one-of-a-kind retailer where you might not find everything, but what you do find is likely cheaper than anywhere else. This store has done the most to roll back prices in this nation, often through its premium house brand, Kirkland Signature. Costco isn’t afraid to go after any nationally branded product if it won’t lower prices, and under the Kirkland label, they get prices down because the Kirkland brand is better than most of the branded stuff.”
Costco Wholesale Corporation (NASDAQ:COST) represents a strong investment opportunity due to its impressive financial performance and strategic advantages. Costco Wholesale Corporation (NASDAQ:COST) posted Q4 2024 earnings per share of $5.09, which aligned with market expectations. Despite challenges in the retail environment, Costco Wholesale Corporation (NASDAQ:COST) continued to demonstrate strong sales growth, particularly in its membership fees and net sales, which were key drivers of revenue. Costco Wholesale Corporation (NASDAQ:COST) also declared a quarterly dividend of $1.16 per share, reflecting its ongoing commitment to returning value to shareholders.
Costco Wholesale Corporation (NASDAQ:COST)’s membership model is a key asset, generating $4.3 billion in pure profit from membership fees in FY 2023, with a high renewal rate of around 90% reflecting strong customer loyalty. Costco Wholesale Corporation (NASDAQ:COST)’s expansion plans, including opening about 30 new warehouses annually and focusing on international markets like China, present significant growth opportunities.
Additionally, Costco Wholesale Corporation (NASDAQ:COST) has shown resilience during economic downturns, such as the COVID-19 pandemic, and its e-commerce business has grown by 9.7% in FY 2023. These factors together highlight Costco’s potential for continued revenue growth and leadership in the retail market.
ClearBridge Sustainability Leaders Strategy stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2024 investor letter:
“Consumer staples holdings were also standouts in the quarter, such as Costco Wholesale Corporation (NASDAQ:COST), which continues to execute well and delivered better than expected earnings, helped by strong traffic driving better expense leverage. Customers also looked to be shifting toward more discretionary purchases.”
