UBS Discusses Costco's (COST) Millennial Challenge
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Price: $899.41 +0.10%
Rating Summary:
28 Buy, 18 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 10 | New: 48
Rating Summary:
28 Buy, 18 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 10 | New: 48
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UBS analyst Jason DeRise trimmed his price target on Costco Wholesale (NASDAQ: COST) from $123 to $120 and maintained a Neutral rating given the company's challenges with Millennials (described as those with birth years ranging from the early 1980s to the early 2000s).
DeRise comments, "Costco continues to be a great retailer, but investors are increasingly seeing it has a blind spot: Millennials. On the Q2 conference call, this was discussed by management as an opportunity. In addition to its mobile app and relaunched website last year, areas of focus include (1) adding organic fresh meats and produce, (2) increased involvement with social media and (3) testing Google Express' delivery in the Bay Area.
The analyst contends Costco must attract the "frugal, affluent Millennial" to its stores long-term and highlights: (1) Low home ownership is a key barrier for Millennials shopping Costco. Home-owner Millennials are 17% more likely to shop at Costco than other Millennials. (2) But, current Millennials who shop Costco are not loyal: These Millennials are also more likely to shop at ~2x the number of retailers compared to Costco's Boomers. This smaller group of wealthy Millennials are free-spenders, who happen to shop at Costco. (3) Wealthy Millennials who do not shop Costco are 4x larger than those who do shop at Costco. These are "frugal, affluent Millennials" who are finding value from a limited number of retailers, such as Target, Dollar stores and Amazon (but will still splurge at the Apple store regularly)."
For an analyst ratings summary and ratings history on Costco Wholesale click here. For more ratings news on Costco Wholesale click here.
Shares of Costco Wholesale closed at $112.85 yesterday.
DeRise comments, "Costco continues to be a great retailer, but investors are increasingly seeing it has a blind spot: Millennials. On the Q2 conference call, this was discussed by management as an opportunity. In addition to its mobile app and relaunched website last year, areas of focus include (1) adding organic fresh meats and produce, (2) increased involvement with social media and (3) testing Google Express' delivery in the Bay Area.
The analyst contends Costco must attract the "frugal, affluent Millennial" to its stores long-term and highlights: (1) Low home ownership is a key barrier for Millennials shopping Costco. Home-owner Millennials are 17% more likely to shop at Costco than other Millennials. (2) But, current Millennials who shop Costco are not loyal: These Millennials are also more likely to shop at ~2x the number of retailers compared to Costco's Boomers. This smaller group of wealthy Millennials are free-spenders, who happen to shop at Costco. (3) Wealthy Millennials who do not shop Costco are 4x larger than those who do shop at Costco. These are "frugal, affluent Millennials" who are finding value from a limited number of retailers, such as Target, Dollar stores and Amazon (but will still splurge at the Apple store regularly)."
For an analyst ratings summary and ratings history on Costco Wholesale click here. For more ratings news on Costco Wholesale click here.
Shares of Costco Wholesale closed at $112.85 yesterday.
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