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Costco unveils sales smasher, dividend kicker

Analysts weigh in on Costco shares and reset price targets.

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There are a few undeniable certainties. The sun rises in the East, the sky is blue, and seemingly, everyone loves shopping at Costco.

The company's knack for delighting customers with new products and services at cut-rate prices has boosted growth, resulting in a steady string of increasing quarterly sales and profits. 

It appears likely that the winning streak will continue. 

Costco unveiled its latest monthly sales update on April 10, and the results were undeniably good. Management seemed impressed enough by the performance to revamp its stock dividend, leading analysts to reset stock price targets and outlooks.

Customer shopping trends are driving Costco sales higher.

Bloomberg/Getty Images

Inflation takes a toll on consumer spending

Inflation wasn't much of a problem during 2020. The world was mired in the Covid pandemic, and economies were shaken by shutdowns, leading to tepid price increases as demand faltered. U.S. Gross Domestic Product fell by a third in the second quarter of 2020, causing retailers like Costco to become ghost towns.

Related: Costco has an answer for Sam's Club's expansion plan

Since then, the story has been much different. The Federal Reserve embraced a zero-interest rate policy, and Congress enacted broad-based stimulus to re-spark economic growth. 

This one-two punch arguably worked too well.

GDP rebounded in the third quarter of 2020 and stayed strong throughout 2021. The bounceback provided tinder for inflation that got lit when the Ever Given freighter grounded in the Suez Canal, throwing supply chains into disarray.

Inflation quickly spiraled, peaking near 9% in June 2022. It took a toll on budgets, forcing consumers to ratchet back consumer discretionary spending to cover necessities. 

Unfortunately, it hasn't gotten much better for shoppers.

To crimp inflation, the Fed has embarked on the most restrictive policy of rate hikes since Volcker smashed inflation in the early 1980s. This has caused credit card, auto loan, and mortgage rates to surge, further taxing consumers.

Costco rides a consumer cost-cutting wave

Consumers don't spend much time scrutinizing receipts during good times, but they sure do during tough times. Their recent cost-consciousness has hurt many retailers, but it's been a boon for Costco. 

Membership at the warehouse chain has climbed because shoppers want to save money by buying in bulk.

Related: Costco enters a controversial industry with its latest move

In its last fiscal quarter (ending February), revenue improved by 5.7% and profit swelled by 12% to $3.71 per share partly thanks to growth in high-margin membership fees.

For perspective, national retail sales at all retailers grew by 2.1% during that three-month span, according to the U.S. Census Department.

Costco's outperformance is impressive, but retail sales growth can be impacted by new stores (Costco opens over 20 new stores per year, historically) and, in the case of some retailers like Costco, gasoline prices. 

Therefore, a better apples-to-apples measure of its retail strength is comparable (comp) sales growth, which reflects year-over-year sales growth at stores open for at least one year.

Costco's strength on that measure is also notable. Its comp sales increased 5.6% in the February quarter, suggesting new stores aren't the driving force behind its increasing revenue. Instead, it's due to more members spending more money. 

"We ended the second quarter with 73.4 million paid household members, up 7.8% versus last year, and 132.0 million cardholders, up 7.3%," said Costco CFO Richard Galanti on the company's conference call. "Our average transaction or ticket was up three-tenths of a percent worldwide and one-tenth of a percent in the US."

Based on Costco's latest monthly update, its business appears to be strengthening.

Costco's revenue rose 9.4% year-over-year in March, including new stores and gas sales, to nearly $21.5 billion, and its comp store sales were up a very healthy 7.5%. Easter holiday sales boosted comp sales, but only by about a half-percent.

Analysts revamp Costco stock forecasts

Following the March numbers, Wall Street analysts reset their outlooks.

Roth MKM's Bill Kirk noted that March's results accelerated from February, leading him to boost his Costco stock price target to $650 from $601. The increase is sizable, but Kirk's target is still south of Costco's $732 share price on April 11.

Related: Costco makes a huge change to a signature food item

Kirk's downbeat price target stems from thinking Costco is richly-valued. Its shares currently trade at a forward price-to-earnings ratio of 45. That's considerably higher than Walmart, owner of Sam's Club, which has a forward P/E ratio of 25, and BJ's Wholesale Club, a pure-play rival warehouse club, which has a forward P/E of 20.

DA Davidson's $680 price target is also below current share prices. However, it said March delivered the best core comp growth since January 2023, excluding the holiday-driven month of December.

Loop Capital's $820 price target is more optimistic. However, that's down from $830 because of worry that sticky inflation could mean this is as good as it gets for comp sales growth.

Evercore ISI called Costco's March numbers "a banner performance," upping its price target by $10 per share to $805 and maintaining an Outperform rating.

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Costco also drew praise from Chris Versace, portfolio manager of TheStreet Pro's real-money portfolio. 

He called the results a "knockout," particularly given that Costco management also announced it is increasing its shareholder dividend by 13.7% to $1.16 per share.

"While there was some benefit because of the Easter holiday, even on an adjusted basis the sales increase confirms consumer wallet share gains," said Versace. "Costco continues to expand its warehouse footprint, which in turn drives its high-margin membership fee revenue stream. Exiting last month, the company had 876 warehouses with 69% in the U.S."

Versace also points out that Costco "doubled the number of warehouse locations in China to six this past March," and its e-commerce revenue continued to shine.

"Arguably the most surprising comp sales figures were for Costco’s e-commerce business, which climbed 28% year over year, on top of a tough double-digit comp of 14.5% a year ago," said Versace. "We expect overall digital shopping figures in the March Retail Sales report to be strong on the back of Amazon’s (AMZN) 'Big Spring Sale' event."

Related: Veteran fund manager picks favorite stocks for 2024

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International

Here is why an airline is trolling Sydney Sweeney

Ryanair saw a chance to troll the White Lotus star on its social media platform.

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Launched out of Dublin in 1985, the budget carrier known as Ryanair  (RYAOF)  has grown into the largest airline in Europe with its business model of offering rock-bottom prices that in some cases can be as little as €20 euros for short flights between nearby European cities. 

Now in its fourth decade, the airline has also managed to reach a new generation with its unconventional social media presence and humor that in some cases verges into trolling and making fun of its own clients. When a passenger complained about the service during a flight on social media, an airline representative responded by asking whether she would rather pay “€19.99 or €136,000,000?” for a private jet. In a different video posted to its TikTok account, Ryanair looped a shot of a passenger standing when everyone else is sitting down to poke fun at travelers who get up too early after landing.

Related: A budget airline is wildly popular on TikTok for actually being funny

The latest person to fall victim to Ryanair’s online banter is Sydney Sweeney from the popular HBO show “White Lotus.” Earlier this week, the 26-year-old actress appeared in an IMDB video in which she revealed that Leonardo DiCaprio was her celebrity crush growing up.

A Ryanair plane sits on the ground in Zaventem, Belgium. Photo by Thierry Monasse/Getty Images.

Thierry Monasse/Getty Images

DiCaprio also got dragged into this (here is how)

After a fan site shared this clip from the interview on the social media platform formerly known as Twitter, Ryanair reshared it while adding that Sweeney was out of luck because she was “much too old for him.” (The latter is a reference to the long-running internet joke that DiCaprio rarely dates women older than 25 even though the actor is turning 50 later this year. At 26, Sweeney is still almost half his age.)

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The post received more than 12 million views and 182,000 upvotes as a result of quickly going viral as an example of Ryanair’s dark humor — simultaneously trolling two separate people.

‘Booking a ticket on Ryanair after this…’

“Too savage," wrote one of the commenters while another added that he was definitely “booking a ticket on @Ryanair after this.”

Over the last four years and after the pandemic especially, the airline has amassed a significant TikTok and Instagram following with this type of social media strategy. Sometimes it crosses the line into making fun of clients (and leads to some angry comments) but generally travelers are receptive because there are plenty of times when Ryanair is also self-deprecating.

Back in September, founder and CEO Michael O’Leary was pied in the face during a visit to the European Commission Headquarters in Brussels (protesters argued that ultra-low fares like the kind Ryanair offers are a significant source of greenhouse gas emissions because they demotivate people from taking the train). O’Leary was captured wiping the cream off his face and saying “well done” to the protesters before heading off to have his meeting with the European lawmakers.

Ryanair's social media team quickly jumped on the chance to post a video calling it a “warm welcome in Brussels” as well as advertise some new routes it launched for the coming winter season by saying that it has some “tasty low fares.”

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You can get into many national parks for free (here is how)

The start of National Park Week means you can get in without paying the entry fee.

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Every year, National Park Week is organized with the goal of raising awareness around the country’s parks and forests.

While the pandemic has significantly increased the number of people who started traveling locally and made a goal to visit as many National Parks as possible, the aim of education about what treasures the country has and how they need to be conserved remains.

Related: These national parks are the most expensive to visit

Ever year, the National Park Service (NPS) also marks the start of National Park Week by waiving the entry fees that many of the parks charge its visitors. This year, free admission is available on April 20 while various activities are organized for the length of the week. 

Veronika Bondarenko took this photo from New River Gorge National Park.

Veronika Bondarenko

This is when you can get into Yosemite, Teton and other parks for free

“Love national parks?” the NPS writes in its announcement. “There's a holiday for that! Join us for National Park Week, a nine-day celebration of everything ‘parks.’ Not just about more than 400 national parks nationwide of different shapes, sizes, and types.”

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The entry price of each national park varies (some are free entirely while others only charge for things like parking or camping which would not be waived). Parks like Yosemite in California’s Sierra Nevada Mountains and Glacier National Park on the border between Montana and Canada’s British Columbia charge a $35 entry fee per vehicle which will be waived on April 20. 

The fee is lower ($30 per vehicle) in Florida national parks like Everglades and Gulf Islands National Seashore but, regardless of the individual number, will be waived for the day. One will also not have to pay the lower entry fees for those coming by bike or foot.

National Parks are getting crowded and this leads to higher fees

While the waived fee can help some save some money and take advantage of a national park as a large family, visitors have been reporting that parks can get especially crowded during the free days.

As overcrowding has become a persistent issue even during the regular season, many parks across the country have been trying different things to combat it — from raising entry fees to timing when visitors come in.

At the end of March, Mount Rainier National Park in Washington State announced that it will soon start requiring those entering through its Paradise Corridor from the Southeast and Sunrise Corridor from the northeast between May and September to register their visit online. 

Earlier in the year, year, Zion National Park in Utah also raised park entry prices from $20 to $35 per night for those wanting to spend the night camping in its Watchman or South Campgrounds.

“Mount Rainier National Park has experienced an approximate 40% increase in visitation over the last 10 years, leading to overcrowding during the summer and damage to fragile ecosystems," the Washington National Park Service said in a statement on the changes. "In 2024, Mount Rainier National Park will implement a pilot timed entry reservation system to improve the visitor experience to the park by reducing wait times, congestion, and resource impacts on trails caused by overcrowding.”

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Government

Scientists use wearable technology to detect stress levels during sleep

What if changes in a person’s stress levels could be detected while they sleep using wearable devices? A new study by University of Vermont researchers…

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What if changes in a person’s stress levels could be detected while they sleep using wearable devices? A new study by University of Vermont researchers published today in PLOS Digital Health is the first to find changes in perceived stress levels reflected in sleep data—an important step towards identifying biomarkers that may help flag individuals in need of support. 

Credit: Andy Duback

What if changes in a person’s stress levels could be detected while they sleep using wearable devices? A new study by University of Vermont researchers published today in PLOS Digital Health is the first to find changes in perceived stress levels reflected in sleep data—an important step towards identifying biomarkers that may help flag individuals in need of support. 

Given how critical sleep is to physical and mental health, the research team suspected signals might exist in sleep data, says Laura Bloomfield, a research assistant professor of mathematics and statistics and lead author of the study. “Changes in stress are visible.”

When parsing baseline sleep data, the researchers found “consistent associations” between people’s perceived stress scores and factors such as total sleep time, resting heart rate and heart rate variability, and respiratory rate. While it’s no surprise that most participants received less than the recommended 8 to 10 hours of sleep for young adults, the minutes do matter. For every additional hour of sleep recorded, the odds of someone reporting moderate-to-high stress decreased about 38 percent. Nightly resting heart rates offered more clues. For each additional beat per minute, the odds of experiencing stress increased by 3.6 percent.

Bloomfield is a principal investigator of the Lived Experience Measured Using Rings Study (LEMURS)—a longitudinal study started at UVM in 2022 that tracks hundreds of first- and second-year college students 24 hours a day using a wearable Oura ring biosensor and through surveys about their wellbeing. This is the first peer-reviewed paper from LEMURS and shows that data gleaned from wearables can reveal changes in people’s mental health status.

“The study showed that sleep measures from the Oura ring were predictive of participants’ perceived level of stress. If we are able to identify in real-time that someone is experiencing increased stress, there might be an opportunity to offer helpful interventions.,” Bloomfield explains. “There are a lot of ways to implement interventions, but the first step is understanding the connection between sleep measures and mental health measures.”

About LEMURS

The LEMURS project was conceived by Chris Danforth, professor of applied mathematics at UVM’s Vermont Complex Systems Center and fellow of the Gund Institute for Environment and Bloomfield, MD/Ph.D., to determine how wearable technologies could be used to improve young people’s health and well-being with personalized health feedback. LEMURS is supported by a grant from MassMutual.

College students, in general, don’t sleep enough, often feel stressed, and are at greater risk of experiencing mental health issues. The LEMURS research team will also evaluate the effectiveness of interventions such as exercise, excursions into nature, and group therapy—all interventions which have previously shown improvements in health and wellbeing—to understand which work best and how quickly scalable they are for large populations. But to do all of this requires identifying biometric data that provide the clearest signals for addressing changes in physical and mental health—a process that involves gathering and sifting through millions of hours of data each year.

LEMURS participants wear Oura rings that quietly collect measurements including temperature, heart rate, breathing rate, and nightly sleep duration as well as complete routine surveys to collect more subjective responses about potential stressors and their emotions. Location information is also used to calculate the exposure participants have to nature. All this data is then combed by LEMURS researchers like Mikaela Fudolig, research assistant professor of mathematics and statistics, who test specific relationships that could be used to develop health interventions. She co-authored the PLOS Digital Health paper and says there is power in the study’s numbers.

Initially, 600 first-year students aged 18 to 20 enrolled in LEMURS. A second cohort of first-year students was added in fall 2023 with a goal of following these individuals through college and far into the future.

“We have been tracking the same students for almost two years now, and there are very few studies that do that,” says Fudolig, research assistant professor of mathematics and statistics, who co-authored the PLOS Digital Health paper and says there is power in the study’s numbers. “We have several sources of data. Taking these all together—your ring data, your survey data, your nature-dose data, we also have blood work done—we will see a lot of different dimensions from these participants. So, combining them is, to me, the most exciting thing of it all.”

These potential predictors of stress led to a sleep analysis of LEMURS participants by Fudolig which detected two distinct heart rate curves, particularly among women. We find that those who reported an impairment in their daily life due to anxiety or depression had heart rates that dropped later in the night, she explains.

“A high burden of stress”

The COVID-19 pandemic worsened mental health problems for an already vulnerable population. In the decade before COVID, the Center for Disease Control and Prevention found the percentage of high school students nationwide experiencing persistent feelings of sadness or hopelessness jumped from 26.1 percent to 36.7 percent. The CDC’s 2021 Youth Risk Behavior Survey showed another jump—42 percent of students reported feeling persistently sad.

This is one reason Danforth and Bloomfield launched LEMURS in the first place.

“There is a high burden of stress in this population,” Bloomfield says, “College is seen as a very carefree period of time where you are coming into your own, but it’s also a period with a lot of transition and a lot of additional stressors. There needs to be better, accessible support systems for young adults during this time.

She wasn’t surprised to learn that perceived stress scores of LEMURS participants were high—64% of responses were considered moderate-to-highly stressed. These are personal assessments of how individuals feel about problems they encounter and their ability to manage them and responses vary depending on one’s life experiences, personality, support, and coping skills. Part of the challenge with interpreting stress signals using biometric data is figuring out when deviations from someone’s baseline are problematic and concerning, Bloomfield explains.

“This is a resilient population, they are young and healthy,” she continues. “But I think this study is bringing to light important issues facing this population. The ultimate goal with our research is that you can help support people in times of decreased mental health or physical health status.”

Additional UVM researchers involved in this study include Julia Kim, Jordan Llorin, Juniper Lovato, Matt Price, Taylor H. Ricketts, Peter Sheridan Dodds, Kathryn Stanton, and Christopher M. Danforth, working with Ellen McGinnis and Ryan McGinnis (Wake Forest University). This is the first peer-reviewed paper from UVM’s Lived Experience Measured Using Rings Study, a longitudinal investigation using wearable technologies to detect and incentivize positive changes in physical and mental health. The study is funded by a grant from MassMutual.


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