Costco Wholesale Corp.
COSTS -0.54%
is testing roadside pickup in three warehouses in Albuquerque, the company announced during its Call-up of results for the second quarter of the financial year.
The company offered few details other than saying that it’s been going well so far.
“Our members reacted and the size of the basket actually exceeded our expectations. Our focus is, of course, on how we can determine more efficiently whether this offer is scalable and makes economic sense for us, ”said Richard Galanti, CFO of the retailer, a FactSet transcript of the results.
Analysts are already seeing the benefits of offering the service.
Walmart will invest $ 350 billion in U.S. manufacturing over the next decade
“Given the success peers have had with such services, we see this as a potential big lever for Costco to see the option of a pickup membership at a super premium price, which could be a very high membership fee and high loyalty driver and main catalyst for Costco, ”wrote BMO Capital Markets in a note.
BMO rates the Costco stock as above average with a target price of $ 410 of $ 430.
“Looking to the future, the pilot with three roadside branches is still at a very early stage, but we expect it will expand sooner rather than later. In return, Costco will be able to offer customers a leading value proposition and convenient fulfillment options, ”Cowen analysts write in a note.
Cowen data suggests that 27% to 29% of Walmart Inc.
WMT, + 1.25%
and Target Corp.
TGT + 1.64%
Customers use the services of these roadside retailers.
Cowen rates Costco stock as above average with a target price of $ 410.
Dollar Tree is expanding in terms of fresh groceries, higher prices, and new store formats
Competing warehouse retailer BJ’s Wholesale Club Holdings Inc.
BJ, + 2.41%,
who reported his Fourth quarter earnings this weekThe retailer states that more than half of its BOPIC (Buy-Online-Pickup-in-Club) orders are carried out by the roadside.
Now the retailer is introducing the ability to use electronic power transmission (EBT) to pay for orders placed on the ecommerce website for club pickup or roadside collection. BJ plans to make the capability available to all participating locations by spring.
“BJ’s was undoubtedly a major beneficiary of COVID in fiscal 20, but it’s probably better
positioned as most to see lasting benefits even after the pandemic has faded.
It is important that the company continued to invest in the experience of its members during the COVID, ”write UBS analysts.
One of the investments UBS is leading is roadside pickup.
“BOPIC and roadside sales tend to be larger baskets, and same-day sales have the same margins as traditional sales at our clubs,” said Robert Eddy, BJ’s chief financial and administrative officer, on the earnings call, according to FactSet.
UBS rates BJ’s share purchase with a price target of $ 55.
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Despite the added service, MKM Partners analysts are concerned that post-COVID BJs are causing “excessive exposure” in zip codes shared with Walmart, “uninspired customer feedback” and “pessimistic staff” and “significant underinvestment in proportion.” “Being squeezed to Costco. “
MKM rates BJ shares as neutral with a fair value estimate of $ 41.
The Costco share is down 15.8% year-to-date.
BJ’s stock is up nearly 5% through 2021.
The Dow Jones industrial average
DJIA, + 1.85%
has increased by 2.9% in the year to date.
