Most of us probably know somebody—or even was that somebody—who borrowed a friend or family member’s Costco (COST) card and went shopping at the bulk retail specialist without actually being a member. Maybe you wanted to see for yourself what it was like. Maybe you just wanted to make a single stock-up run. But those days may be numbered under Costco’s new checkup plan, and shares were up fractionally in the closing minutes of Tuesday’s trading as a result.
Right now, the move is somewhat limited. Reports note that several stores in Canada will be testing out a new membership scanning system in Ottawa, Regina, Edmonton, and the Lower Mainland of British Columbia. Members will need to scan their membership passes, and those whose photos don’t match the membership will not be allowed to shop.
Moreover, Costco even plans to outpost employees at the door to ensure that the scans are done properly and successfully. Guests will be allowed, of course, but they’ll need to be in the company of a current Costco member to get in.
An Unexpected Loss to a Major Competitor
Easily, Costco’s biggest competitor is Walmart (WMT), whose Sam’s Club outlets are basically the same concept, though with several differences in execution. The biggest difference between the two stores is their private-label goods. Sometimes called “generics” or “store brands,” private label goods are basically goods made in-house and cost less.
Walmart has had remarkable luck of late with its private-label goods. Five of its private-label brands—Equate, Freshness Guaranteed, Great Value, Mainstays, and Marketside—have all had 50% household penetration or better in the last year. While Costco is somewhat limited on total penetration numbers thanks to its status as a members-only shop, it is making a good showing, but still lags behind its competitor on this front.
What Is the Prediction for Costco Stock?
Turning to Wall Street, analysts have a Strong Buy consensus rating on COST stock based on 20 Buys and six Holds assigned in the past three months, as indicated by the graphic below. After a 58.33% rally in its share price over the past year, the average COST price target of $907.74 per share implies 5.09% upside potential.
