Down 15% year-to-date, now is a great time for investors to load-up on grocery retailer Costco (NASDAQ:COST) stock.
The leading warehouse club’s stock has gotten pulled down with the broader market and is currently trading at around $477, which is just off its 52-week high of $571.49.
Despite the current pullback, Costco’s share price is still up 32% over the past 12 months.
Rather than fear the decline, investors should see it as an opportunity to load up on a great stock that has delivered a 195% return to investors over the last five years.
A Closer Look at COST Stock
Costco was performing well before anyone had heard of Covid-19, but the Seattle-based company has thrived during the global pandemic as people continued to turn to its membership-only stores to stock up on food and other essentials.
Costco now boasts 62.5 million membership households globally and more than 90% of those households renew their membership each year.
The company’s revenue grew at a compound annual growth rate (CAGR) of 8.2% over the last decade, rising from $99 billion in 2012 to $195 billion in 2021. By just about every metric, Costco has been a success as a retailer and COST stock a success as an investment.
The company has used the pandemic to enhance its online offerings and expand the services it provides to its members.
This includes providing at-home delivery in some markets, allowing people to schedule returns and in-store pick-ups, and expanding the items available online.
The result has been stellar growth in Costco’s e-commerce sales. Costco, which provides monthly updates, said its e-commerce sales grew a solid 17.8% in December following growth of 12.2% in November.
The company has made clear that e-commerce will continue to be a key focus moving forward.
Costco also continues to expand its brick-and-mortar retail outlets. During 2021, the company opened 25 new physical locations, bringing its total number of stores worldwide to 828.
The retailer continues to push into new markets internationally, including France and China. Costco has even opened a store in Iceland.
The company plans to add an additional 27 new store locations this year.
Inflation, which is currently at a 40 year high in the U.S., is putting pressure on retailers right now and Costco is no exception. Inflationary pressures and ongoing supply constraints have forced Costco to raise prices on some of its in-store items.
Fortunately, the rise in consumer prices has actually pushed many consumers to spend more at the warehouse club because people find they get more food for less money than at other grocers.
This helps to account for the fact that Costco’s December revenue grew 16% while its comparable sales climbed 14.5%, trends that have continued for the last 10 years.
Costco’s pricing power and ability to raise prices while still coming in lower than its competitors should help it weather the current inflationary environment.
The company increasing prices in the past has not led consumers to abandon Costco or its stores as evidenced by its greater than 90% membership renewal rate.
Charlie Munger, the long-term business partner of Warren Buffett, who has helped turn Berkshire Hathaway (NYSE:BRK.B) into a great success, recently highlighted Costco’s pricing power and growing e-commerce business.
Buy COST Stock
Costco is a great stock to buy and hold long-term. The current pullback in the share price presents a fantastic opportunity for investors to purchase shares on the cheap.
It’s worth noting that, in addition, to its share price appreciation, Costco stock also pays a dividend yield of 0.66%, equal to about $0.79 a share per quarter.
However, Costco is known to make special dividend payments. At the end of 2020, the company rewarded shareholders with a one-time special dividend payout of $10 per share, and that was during the depths of the pandemic. For its steady growth and returns to shareholders, COST stock is a buy. Get while it’s on sale!
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.