The news has been deafening for retailers as Amazon, Inc. (AMZN) appears to be taking over the retail world with its planned acquisition of Whole Foods Mkt, Inc. (WFM). As a result, companies like Costco Wholesale Corp. (COST) have seen their share price slide by nearly 18%. In a turn-of-events, Amazon has been pressured following its earnings last Thursday, and today, Costco shares were bid strongly. Is it now time to approach Costco’s sample table?
Much of the recent weakness in Costco has been attributed to Amazon’s news, but is the elephant in the room the competition or the lack of competitiveness by Costco’s management? In an open letter to Costco’s management, Barclays analyst Karen Short commented:
Given the potential that long-term concerns will overshadow near-term results, the only solution near term, in our view, is to convince and communicate to investors that you have a real and defensible strategy in an ever-changing world.
It appears that analysts and investors may be questioning the plan for Costco’s future as more of retail spending is transitioning online and the need to automate is becoming increasingly important to lower costs.
When considering Costco as an investment, I like to place stocks in a strategy bucket. The question for an investor is whether you see Costco as a growth, value or income investment.
As a growth investment, Costco has seen revenue growth slow…