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Oct. 7, 2019, 8:01 a.m. EDT

Costco’s first China warehouse has 200,000 members, blowing past the 68,000 average

Costco also sold a $220,000 diamond in the fourth quarter

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By Tonya Garcia, MarketWatch


Bloomberg
Costco members are flocking to the company’s lone China location

Costco Wholesale Corp. has just one warehouse in China, and shoppers are flocking to it.

Costco’s /zigman2/quotes/201191698/composite COST +0.80%  Chief Financial Officer Richard Galanti said on the retailer’s fourth-quarter earnings call late Thursday that membership at the Shanghai location totals more than 200,000.

“Just to put that in perspective worldwide, the average Costco, ones that have been open for months and ones that have been open for 35 years, all told, have approximately 68,000 member households per location,” he said, according to a FactSet transcript.

Costco made headlines when eager shoppers forced the Chinese warehouse to close its doors for four hours on opening day due to overcrowding.

Costco will open a second location in early 2021, also in Shanghai. The first warehouse opened on August 27.

Watch: How to know which retailers will take the biggest hit from a trade war

According to the company’s latest earnings release, Costco operates 783 warehouses around the world, including 544 in the U.S. and Puerto Rico, 100 in Canada, 39 in Mexico, and 29 in the U.K., making it the second largest retailer globally after Walmart /zigman2/quotes/207374728/composite WMT +1.56%

Another eye-popping number: $220,000. That was the price tag for a diamond Costco sold in the most recent quarter.

That doesn’t beat the diamond Costco sold for $400,000 earlier this year, but it was still significant enough to get a mention on the call.

“Strong China store opening supports membership growth,” reads the Bank of America Merrill Lynch note following the earnings announcement.

See: Here are 3 tips for picking retail stocks

Bank of America analysts highlight membership fee growth, up 5.3% for the quarter to $1.05 billion. And membership renewal rates reached records. In the U.S. and Canada, the rate was 90.9%, up from 90.7% the previous quarter. And globally, it was 88.4%, up from 88.3%.

Bank of America rates Costco shares buy with a $320 price objective, up from $310. Bank of America also share the belief with Stifel analysts that Costco will declare a special dividend.

Cowen analysts also highlight Costco’s online sales growth of 19.8%, with the company adding new items like Weber grills.

“Looking ahead, we believe management’s top priority will be to integrate a mobile payment system to make in-store checkout more efficient, and should also help further accelerate digital sales,” analysts wrote.

Cowen rates Costco stock outperform with a $325 price target.

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“The consistent revenue and traffic growth over the last year reinforces our view that the membership warehouse model is arguably the most attractive business model in hardlines retail,” said Raymond James.

“New members (including millennials) and existing members continue to find value in Costco’s well-edited product assortment and value proposition, which remains the key pillar to its competitive moat.”

Raymond James rates Costco shares outperform with a $300 price target.

Costco stock closed Friday up about 1% in Friday earnings that beat expectations though revenue that missed. For the year to date, the stock has rallied 43.2% while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.07%  as gained 17.8%.

/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 302.90
+2.40 +0.80%
Volume: 1.55M
Nov. 13, 2019 4:15p
P/E Ratio
36.65
Dividend Yield
0.86%
Market Cap
$132.27 billion
Rev. per Employee
$600,967
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/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 120.98
+1.86 +1.56%
Volume: 8.05M
Nov. 13, 2019 6:30p
P/E Ratio
27.26
Dividend Yield
1.75%
Market Cap
$338.58 billion
Rev. per Employee
$223,654
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,094.04
+2.20 +0.07%
Volume: 1.72B
Nov. 13, 2019 4:56p
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Tonya Garcia is a MarketWatch reporter covering retail and consumer-oriented companies. You can follow her on Twitter @tgarcianyc. She is based in New York.

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