Costco’s sea cucumbers sign of global growth opportunity

Can the retailer be king of the retail world?

When Costco Chief Financial Officer Richard Galanti told Wall Street in December that the success of the warehouse retailer’s first China shop had “exceeded our expectations,” he also tossed in an interesting product plug: sea cucumbers.

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The marine delicacy was such a hit in China, the company shared it with the U.S.

“We’ve done a very good job over there with sea cucumbers, which I still have never tried. But what we have found is, particularly on the West Coast in several cities, you’ve got customers that value that as a great item,” he said on the company's fiscal first-quarter earnings conference call.

A 1-pound bag retails for $79.99 as listed on the Costco website, which notes they're good for you as well "with only 1% fat and low in cholesterol."

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While Galanti insisted the sea cucumber story was just “anecdotal” it helps speak to Costco’s global opportunities.

TickerSecurityLastChangeChange %
COSTCOSTCO WHOLESALE CORPORATION280.55-12.59-4.29%

“Open-ended worldwide growth prospects” is one reason why the team at Oppenheimer turned bullish on the stock Tuesday which has been trailing the S&P 500. The team now says shares can rise 7 percent from current levels to $335 per share.

Sea cucumbers aside, Costco grabbed headlines in August when the Shanghai store opened but was forced to close early as shoppers swarmed the retailer eager for deals and to see what U.S. retailer had to offer. The chaos was shared on social media at the time.

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In added color in December, Galanti said membership sign-ups were "beyond good."

Global growth, including Australia, is not the only thing the Oppenheimer team likes,  they were also impressed with the stellar holiday season, despite Costco’s website crashing.

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Costco's retail sales in December, ending Jan. 5, 2020, jumped 10.5 percent to $17.04 billion compared to the same period a year ago.

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They also see “ongoing strength in the U.S. consumer with the potential for improving housing metrics to fuel big ticket” items such as furniture and appliances. Confidence among American homebuilders, an indicator of future demand, is the best it’s been since 1999.

Oppenheimer also wrote that it sees the possibility of a “special dividend” being on the horizon of $10 perhaps in the “coming quarters.” JPMorgan is forecasting something along the same lines. This, in addition to the quarterly schedule of $0.57 payments, would be the icing on the cake for shareholders.

Late Tuesday, those forecasts got watered down.

Costco CEO Craig Jelinek told CNBC, “We’ve done special dividends in the past. ... We have no plans right at the moment, but we always — we’ll always look at that."

Costco’s annual meeting is set for Wednesday.

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