Can Costco Fight Back Against Amazon?

Retail

Published: October 6, 2017 11:50 am

Last Updated: January 12, 2020 7:26 am

Costco Wholesale Corp. (NASDAQ: COST) reported its most recent quarterly results after the markets closed Thursday and investors did not take it well, despite the company beating estimates on both the top and bottom lines. However, the wholesale giant highlighted a new strategy that it will be implementing to take on the likes of Amazon Inc. (NASDAQ: AMZN).

One trend that has taken off recently is delivery, and who controls it, in an effort to expand margins. This has been the result of a growing e-commerce and omnichannel trend spurred on by Amazon.

Retailers have been at the mercy of Amazon and its e-commerce empire for the last couple of years, but as we said before, Costco might have found a way to fight back.

This week Costco is debuting a two-day delivery service on shelf-stable food from its website and expanded fresh-food delivery in a partnership with Instacart. Both services allow Costco members to buy food online at lower prices than were previously available.

Although Amazon may own e-commerce for retail goods in general, groceries may take some time with its integration with Whole Foods. So it makes sense that Costco would branch out in this field ahead of Amazon to get a leg up on the competition.

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Shares of Costco were last seen down more than 6% at $156.86, with a consensus analyst price target of $181.41 and a 52-week range of $142.11 to $183.18.

Amazon was trading at $989.02 a share. The stock has a 52-week range of $710.10 to $1,083.31 and a consensus price target of $1,153.60.

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