Retail Sector Ideas

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Costco Wholesale - >>> Costco offers its 123 million cardholding members a slimmed-down assortment of products in bulk quantities, and it has built a wide moat with the outsize cost advantages it has developed.


https://www.fool.com/investing/2023/03/21/history-suggests-these-4-sp-500-stocks-could-soar/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Thanks to the $4.3 billion in membership fees generated over the last year, the world's third-largest retailer has a ROIC of 22%, eighth best (out of 37 stocks) in the S&P 500's consumer defensive sector.

This cost-leadership positioning and strong profitability helped Costco more than triple the returns of the S&P 500 over the last five years.

Trading with a price-to-earnings (P/E) ratio of 36, the stock is not cheap. However, the company increased its dividend (currently yielding 0.7%) for 16 consecutive years -- yet still only uses 26% of its net income to fund these payments, leaving ample room for growth over the long term.

Furthermore, of Costco's 848 stores, only 117 are outside the U.S., Canada, and Mexico, leaving a long international growth runway ahead.

Why does this matter to investors? During its last earnings call, chief financial officer Richard Galanti explained that some of its foreign countries already generate higher profit margins than its U.S. stores. So investors would be wise to add to Costco over time as the company eyes new foreign markets.

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