The company offered few details, except to say that, so far, it’s going well.
“Our members have responded to it and basket size have actually surpassed our expectations. Our focus, of course, is how can we be more efficient at doing it to determine if this offering can become scalable and make economic sense for us,” said Richard Galanti, chief financial officer for the retailer, on the earnings call, according to a FactSet transcript.
Analysts already see the benefits of offering the service.
“Given the success that peers have had with such services, we see this as a potential huge lever for Costco to pull and see the possibility for a super-premium-priced pick-up membership, which could be a very strong membership fee and loyalty driver and major catalyst for Costco,” wrote BMO Capital Markets in a note.
BMO rates Costco stock outperform with a $410 price target, down from $430.
“Looking ahead, the three-store curbside pickup pilot is in the very early stages, but we anticipate will expand sooner than later. In turn, Costco will be able to offer shoppers a leading value proposition, along with convenient fulfillment options,” wrote Cowen analysts in a note.
Cowen data suggests that 27% to 29% of Walmart Inc. /zigman2/quotes/207374728/composite WMT +0.32% and Target Corp. /zigman2/quotes/207799045/composite TGT +1.36% customers use those retailers’ curbside services.
Cowen rates Costco stock outperform with a $410 price target.
Competing warehouse retailer BJ’s Wholesale Club Holdings Inc. /zigman2/quotes/203668982/composite BJ +1.12% , which reported its fourth-quarter earnings this week , launched curbside pickup in the second quarter of 2020. The retailer says that more than half of its buy-online-pickup-in-club (BOPIC) orders are fulfilled curbside.
Now the retailer is rolling out the ability to pay using electronic benefit transfer (EBT) for orders placed on the e-commerce site for in-club or curbside pickup. By the spring, BJ’s plans to have the capability in place for all participating locations.
“BJ’s undoubtedly was a major COVID beneficiary in FY’20, but it’s likely betterpositioned than most to see long lasting benefits, even after the pandemic fades.Importantly, it continued to invest in its member experience during COVID,” writes UBS analysts.
Among the investments UBS cites is curbside pickup.
“BOPIC and curbside sales tend to skew towards bigger baskets, and same-day delivery sales have the same margins as traditional sales in our clubs,” said BJ’s Chief Financial and Administrative Officer Robert Eddy on the earnings call, according to FactSet.
UBS rates BJ’s stock buy with a $55 price target.
Even with the added service, MKM Partners analysts are concerned that BJ’s will get squeezed post-COVID for reasons including an “outsized exposure” in ZIP Codes shared with Walmart, “uninspiring customer feedback” and “pessimistic employees,” and “considerable underinvestment relative to Costco.”
MKM rates BJ’s shares neutral with a $41 fair value estimate.
Costco stock has fallen 15.8% for the year to date.
BJ’s stock is up nearly 5% for 2021 so far.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.48% is up 2.9% for the year to date.