Costco Wholesale Is One of the Safest Picks for Inflation Worries

With inflation heating up, Costco Wholesale (NASDAQ: COST) is one of the safest bets in the market. In March, inflation was up 8.5% year-over-year (YOY) — its worst read since 1981. Worse, that’s up from a 7.9% YOY jump in February. This is largely thanks to skyrocketing energy and food prices. But despite this, COST stock has been resilient, which we can see in its March 2022 sales.

For the month, net sales jumped 18.7% year-over-year to $21.6 billion from $18.2 billion. In addition, the company just raised its quarterly dividend to 90 cents per share, or $3.60 a year from $3.16 a year.

“That’s no surprise, given that value-oriented stores resonate with shoppers even more keenly when they’re closely watching their budgets. Oppenheimer expects that trend to continue, rating the stock a buy even as it bumps up against record highs,” reports Barron’s contributor Teresa Rivas.

With Costco, we also have to remember it sells products that consumers must have no matter how poorly the economy is doing. It doesn’t matter how steep of a downturn it takes — consumers still need soap, detergent, toothpaste, toilet paper and food, which makes COST stock attractive.

Earnings have also been solid for Costco. For the second quarter of 2022, COST stock posted earnings per share (EPS) of $2.92 on sales of $51.9 billion. That was better than expectations of EPS of $2.76 on sales of $51.5 billion. Same store sales were up 11.1%.

In addition, as also reported by Barron’s Rivas: “’Near-term, the market may be underestimating the strength of Costco’s position with higher inflation’ wrote Jefferies analyst Stephanie Wissink, given that the overall results confirmed the company’s ability to handle this and other supply-chain related headwinds. She has a Buy rating and $650 target on the stock.”

On the date of publication, Ian Cooper 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.

Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.


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