Every sector has a key metric that may be more important than things like earnings or profit margins in the short-term. For instance, the restaurant industry may look at how many times its tables turn over customers during the course of an evening.
For retailers, the key metric is same-store sales. It cuts through the false growth that could be reported if a company is expanding by opening new locations, even if it may be cannibalizing existing locations.
One company capable of delivering strong returns with this metric is
Costco (COST).
The retailer just reported that same-store sales rose 17.2 percent. Plus, e-commerce, still a small part of the company’s operations, rose 9.2 percent.
The news led to a further rally in shares, which hit a new 52-week high last week. Shares of the retailer are up 62 percent in the past year. While a bit pricey at 44 times forward earnings, the company’s brand and positioning provide it with a powerful moat.
Action to take: The company is an attractive long-term holding, but investors should consider buying the company on any drop of more than 10 percent in shares rather than buy near all-time highs.
For traders, momentum is the name of the game. And the company may have some dips, but could still head higher. The July $680 calls, last going for about $8.00, could offer mid-to-high double-digit returns in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
