Costco Wholesale's (COST) value-focused strategy and higher-income customer base should support continued market share gains amid a price-sensitive consumer environment, BofA said in a Wednesday note.
The brokerage expects stable Q4 comparable sales, $6.52 in adjusted earnings per share versus $6.55 consensus, and 11.3% sales growth, with a 10 basis point gross margin decline partly offset by 20 basis points of SG&A leverage.
According to the report, US Q4 comparable sales excluding gasoline rose 7.2% versus 6.8% in Q3, while BofA expects membership growth to normalize at 4% to 5%, supported by new perks and the Kirkland brand.
The analyst said any tariff refunds received in Q4 could help fund price investments, while Costco's strong cash position and historical two-to-three-year payout cycle could support a special dividend announcement in the coming quarters.
BofA reiterated its buy rating on the stock while lowering its price target to $1,095 from $1,200.
Price: $899.76, Change: $-1.59, Percent Change: -0.18%