You just wait one minute. It's not ending yet!
Throughout this pandemic period analyst have constantly misjudged the staying power of the pandemic and the change in behavioral patterns as well as the havoc that it has wrought on even the best of enterprises. It doesn't matter whether they are analyzing a company such as Owens & Minor (OMI) , which makes personal protective equipment (PPE), a company that has told us that it's going to have a blowout year yet the analysts are just beginning to realize the numbers have staying power, or Lennar (LEN) , where they are being dragged kicking and screaming to stay on top of the earnings, or Darden Restaurants (DRI) , where they are starting to come to believe that it's a last-man-standing situation. They can't seem to get their arms around the idea that Covid-19 could be here to stay.
Nowhere is the gulf more obvious than with the stock of Costco (COST) , which reported Thursday evening and is a holding of my Action Alerts PLUS charitable trust. There are so many things that the analysts are worried about, a spike in Covid spending to $281 million, the need to bonus employees or the calculation of how many new patrons will stay with them when the pandemic is beaten.
I say wake up, analysts. Unlike most chains, Costco has been one step ahead of the Covid posse the whole time.
Analysts seem to forget already how incredible it was that Costco decided that you couldn't get in without a mask at the same time that the other chains were afraid of lost business because of the inconvenience and discomfort that a typical mask generates. They took the gamble and it paid off. A combination of a commitment to safety that included the end of the popular sampling and the wide aisles that make contact less likely played right into Costco's hands, which is how you get 11% comparable store sales, a staggering gain.
Now, though, the analysts are skeptical again. Once a shopper gets stocked up on goods, particularly paper and cleaning merchandise, are they done? Will they come back when Covid is beaten? And how come the company needs to spend so much to keep employees happy and safe?
These concerns are moronic. Why? Simple.
First of all, Costco has always paid more than every other store. I bet the employee turnover, and hence the need for training -- worse than a deadweight loss because these trainees can really screw things up -- is by far the lowest of any chain.
Second, the big expense will go away when Covid goes away anyway, so any decline in customers -- which I expect to be nil -- will be made up by improving gross margins.
Finally, it is a club; the customer base is a lot stickier than they think. Costco will deal; they always do.
More important is the fact that Costco offers much better prices.
We, like many others, at least according to the call, are quickly evolving into an outdoor entertainment center at our home because of Covid. It's getting cold. So you need heaters. Costco sees the pattern. That's why it stocks Spiral Flame Patio heaters for $399. The same heater sells for $599 on Amazon (AMZN) . Are you going to revert to Amazon when the pandemic subsides? Or are you going to stick with Costco because of price?
What mystifies me is how, in a common-sense world, not a political world, we all pretty much know the government is screwing up royally the efforts to curb the pandemic. I think the analysts should be more concerned about what the other guys are doing to get the Costco members back to their stores. The answer?
Which is why you can buy Costco, down here, on the ridiculous sell-off that has always proven to be a bargain worth shopping for every quarter the stock gets hammered on illusory concerns, of which this quarter has more than ever.