Careful investors are probably aware that the average consumer is feeling significant financial distress right now. Coca Cola Fast food chains, for example, reported a rare first-quarter decline in sales volume Restaurant Brands (parent of Burger King) and Very good! Brands Both reported declines in same-store sales last quarter despite offering a variety of so-called “value” meals. Even discounter Dollar General It is having difficulty maintaining the revenues of its stores, let alone increasing its sales figures.

Before you jump to sweeping conclusions about all consumer-facing stocks, know that a few companies have weathered this headwind. Costco Wholesale (NASDAQ: COST) one of them. Indeed, it’s in good enough shape to justify the investment in the warehouse-based retailer’s stock. Four bullish arguments stand out.

1. It is reliable, snowy grower

Costco is a membership-based club retailer. The company charges an annual fee of $65 or $130 (depending on your membership plan) to shop at its 861 discount stores. Although it offered mostly basic offerings in its early days consumer goods In bulk packaging, most of their products are now offered in more consumer-friendly, manageable size packs. In other words, it looks more like an actual grocery and general goods store than it used to.

Whatever it is, it works. Only retailer The company, which has managed to grow its top line consistently for decades, has also managed to increase its profits in the same way. There’s no reason to believe Costco can’t continue this growth trajectory over the next few decades.

COST Income (Quarterly) data Y Charts

2. Costco stores continually improve foot traffic and memberships

This permanent progress is not just the result of building more and more stores. Once established, each store can reliably expand its reach within its geographic market.

The relevant metric is same-store sales growth, or revenue growth for locations that have been in business for at least one year. This approach, of course, negates any increase in revenue that might occur as a result of simply opening a new store.

As for how the company is doing on this front, take a look at the chart below. While the period between the beginning of 2020 and the end of last year was skewed, for better or worse, by the COVID-19 pandemic, things are now stabilizing. The company’s domestic and international stores have achieved an average sales increase of 4% since the beginning of this year, easily outpacing declining inflation. (Know that most other retailers aren’t currently producing anywhere near this kind of same-store sales growth.)

Data source: Costco Wholesale. Chart by author. Sales figures are in billions.

It is worth adding that membership growth outpaces new store creation and population growth. The total of 76.2 million paid memberships as of the end of August is 7.3% more than the previous year, but the company operates only 3.3% more physical stores than then.

3. Stock rally pauses

Investors who follow Costco shares closely will likely know that shares have a habit of making steady, if sometimes slow, progress. But lately this has not been the case. The current price of Costco shares is near $890, roughly where it traded in early July. This is a rather unusual pause.

But this is also a buying opportunity. Do not misread the message. Costco shares can certainly be subject to the occasional setback. It could drop below $890 again at some point in the future. However, in retrospect, there seems to be more upside potential here than downside risk.

4. This is how consumers shop now

Finally, perhaps the most important reason to buy Costco shares like there’s no tomorrow is that many (if not most) people now shop the way the retailer sells. This comes from membership-based stores that offer real value, even if their packaging isn’t always the right size.

This wasn’t always the case. In the early days of club-warehouse retailing, these stores didn’t offer everything, and much of what they did offer was wholesaled in inconvenient sizes. Consumers were also baffled by the idea of ​​paying for the privilege of shopping at a particular store.

But things are different now for several related reasons. One of these reasons is that consumers are now accustomed to paying monthly or annual fees for various services. netflix And Amazon Prime comes to mind Peloton Interactive and even some credit cards. It is now much easier to overcome this psychological wage barrier.

Another reason 76.2 million people don’t care about paying annual access fee Costco’s biggest contribution to its stores is that Costco appeals to the current way cost-conscious consumers think and shop. They are price savvy and also willing and able to accommodate Costco’s oversized packaging. Perhaps shoppers now have access to technology and data that allows them to find the best deal possible. This often translates into Costco giving it a competitive advantage against evolving consumer behavior.

Don’t miss this second chance at a potentially lucrative opportunity

Have you ever felt like you were missing out on buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our team of expert analysts publishes a report. “Double Down” stock Advice for companies they think are about to implode. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: If you invested $1,000 when we doubled down in 2010, You would have $23,446!*

• Apple: If you invested $1,000 when we doubled in 2008, You would have $42,982!*

• On Netflix: If you invested $1,000 when we doubled down in 2004, You would have $428,758!*

We’re currently issuing a “Double Down” warning for three incredible companies, and another chance like this may not come anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. James Brumley They have positions in Coca-Cola. The Motley Fool has positions in and recommends Amazon, Costco Wholesale and Peloton Interactive. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a feature disclosure policy.