How Costco Stock Remains Superior Compared To Its Direct Competitors

Costco has been doing very well lately. And so has anyone who owns stocks in the company.

According to Nasdaq, Costco's stock has increased by 13% in July 2022, reaching $516. The rest of the data shared was just as promising with sales in its third fiscal quarter grew by 16.3%. Household memberships also jumped up by 6% while renewal rates for those memberships were 92.3% and 90%. 

Both Nasdaq and The Motley Fool credited Costco's placement during the ongoing inflation as the source of its success. Costco members can buy household items in bulk at a cheap price. So, as the cost of living increases, people turn to Costco to get by. However, The Motley Fool expects this to be the peak of Costco's performance as purchasing power among consumers gets tightened further. It's possible that Costco will not be able to hold out from either raising its membership fee or its general prices.

The reason Costco has done so well during inflation can be seen in news stories cooing over their pushback against inflation's pressure.

On July 18, Vox noticed that Costco refused to raise the price of their $4.99 rotisserie chickens. Costco has kept the whole rotisserie chickens at this price for years (per CNN). The point is that it's a loss leader. They even built their own chicken farm to cut the outsourced production costs of the chickens.

Similarly, Craig Jelinek, the CEO of Costco, gave CNBC a simple answer when asked if they would raise the price of their $1.50 hot dogs: "No." However, CNBC noted that other food court items did have a price increase. The chicken bake grew more expensive by $1 and 20 ounces of soda went up by 10 cents. Still, as the majority of Costco's money comes from membership fees, and while membership sign-ups and retentions are high, Costco should be able to hold down prices of their goods to make that membership worthwhile.