Editors Note:

Some retailers have a moat that Amazon cannot cross. Others are road kill on the retail highway. Costco is immune to the Amazon phenomenon.


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COST - Costco - Company Profile

Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. The company provides dry and packaged foods, and groceries; snack foods, candies, alcoholic and nonalcoholic beverages, and cleaning supplies; appliances, electronics, health and beauty aids, hardware, and garden and patio; meat, bakery, deli, and produces; and apparel and small appliances. It also operates gas stations, pharmacies, optical dispensing centers, food courts, and hearing-aid centers; and engages in the travel businesses. In addition, the company provides gold star individual and business membership services. As of August 28, 2016, it operated 715 warehouses, including 501 warehouses in the United States, Washington, District of Columbia, and Puerto Rico; 91 in Canada; 36 in Mexico; 28 in the United Kingdom; 25 in Japan; 12 in Korea; 12 in Taiwan; 8 in Australia; and 2 in Spain. Further, the company sells its products through online. Company description from FinViz.com.

Costco reported earnings of $1.59 compared to estimates for $1.30. Revenue of $28.22 billion rose 8% but missed estimates for $28.6 billion. Same store sales rose 5% and beat expectations for 4%. Shares spiked $2.50 on the report.

Earnings August 24th.

On May 31st, Costco reported May sales results of $9.86 billion, an increase of 7%. Same store sales rose 4.5% in the U.S. and 6.4% internationally with the company average at 4.5%.

Guggenheim said the May comps reinforce the case for 20% earnings growth in Q4. Costco customers are on track to spend more than $100 billion on their Visa branded credit cards and 70% will be at retailers that are not Costco. The company stands to make $170 million on the commissions from Visa.

People love to shop at Costco and they spend a lot of money. A weekend shopping trip to the local Costco store will expose you to roughly 30 tables of free samples as Costco employees cook up concoctions available for sale in the store. Broiled salmon, cocktail weenies, crab dip, jalapeno biscuits, barbecue, etc, are all available for tasting. Weekend shopping takes on a party atmosphere and the local stores are always full. Amazon cannot crack this code.

We played Costco before the earnings and exited with a nice gain after they announced $7 special dividend for mid May. Now that earnings are over and shares are breaking out to a new high, it is time to play them again.

Buy July $183 Call, currently $2.59, initial stop loss $175.65.

This is a pre special dividend strike that was reduced by the $7 dividend.


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