Costco (COST) reports December sales next Thursday, and Stifel Nicolaus analyst David Schick has a preview out today.
Schick, who has a Buy rating on the stock, says he expects the company to report headline comps between 5% and 6%, compared to the consensus of 5.8% growth. Schick is looking for core comps (excluding gasoline) to be 5%, slightly below the 5.3% the Streets expects.
Here is a further breakdown of his expectations:
December Gasoline Impact: We expect roughly a +50 bp y/y impact from gas inflation in December (average prices up +5% y/y through 12/17), after a �slight benefit� in November (prices up +2.0% y/y), a +125 bp impact in October (prices up +8.6% y/y), a +75 bp impact in September (prices up +6.6% y/y), and a +50 bp y/y impact in August (prices up +2.3% y/y).
�December F/X Impact: We expect a +100 bp impact from f/x in December as (a) the Canadian dollar rose +4.9% y/y (relative to +2.0% y/y in November and +3.8% y/y in October), (b) the U.K. pound rose +4.6% y/y (relative to +0.3% y/y in November and +2.3% y/y in October), and (c) the yen fell -9.8% y/y (after falling -4.1% y/y in November and -2.7% y/y in October). Previously, the monthly f/x impact to comp was +50 bp in November, +100 bp in October, and +25 bp in September.
Cannibalization–from new stores in Asia (specifically Korea and Taiwan, and a reopening in Japan)–will still be a factor, Schick writes, to the tune of -50 basis points. Costco’s international expansion made itself felt, also by 50 basis points, last month as well; previously it had not had a material impact on comps since March 2011.
Schick has a $107 price target on Costco, about 10% upside from current levels. Shares of Costco were recently down 0.5% in afternoon trading.
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