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Costco and Target are primed for growth, experts say

Costco and Target are primed for growth, experts say

According to participants in Supermarket News‘ 23rd annual Financial Analysts’ Roundtable, warehouse clubs, specifically Costco, may be primed for a growth surge.

Wolfe Research Managing Director Scott Mushkin said that Costco’s broad mix of offerings make it a big draw.

“Costco, over time, has created more and more reasons to pay for that membership,” Mushkin said. “It’s an incredibly positive business model.”

“They are probably the best merchants of any retailer I’ve ever covered,” added Karen Short, managing director for equity research at Barclays Capital. “They keep pushing the envelope and keep pushing their vendors, and the deals and price point just keep getting better and better.”

As for BJ’s Wholesale Club, Mushkin had a negative outlook. “If there were a Costco and a BJ’s next to each other, it doesn’t make any rational sense to actually have a membership to BJ’s because the offering is so much more extensive at Costco and the savings are better,” he said.

The participants also singled out Target, which they believe could be a sleeping giant in grocery if it continues to improve its fresh offering and out-of-stocks, and improves on its execution. The panel cited Target’s strong private labels and the company’s ability to develop innovative departments and merchandising.