JP Morgan agrees with the consensus that Costco (COST) will continue its recent success amid the recession. JPM’s key catalysts for the stock:
- The core Costco customer isn’t showing signs of recession with consumer and small business shopping habits relatively unchanged.
- The positive rub-off effect from gas sales is real, with every $1.00 spent at the pump translating into $0.50 of incremental annual spend.
- Penetration of Executive members continues to accelerate – boosting traffic/ticket.
- Costco is likely poaching share from the grocery channel with fresh food and consumable sales leading the comp.
Net, with it becoming more apparent that real consumer spending will likely slow into early 2009 (at a minimum), we think Costco’s defensive membership/mix attributes yet offensive store growth opportunities are an attractive combination.
JP Morgan reiterates OVERWEIGHT on Costco (COST).