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In a note to clients on Wednesday, Evercore ISI analysts said that loyalty models like Costco (NASDAQ:COST) and BJ’s Wholesale Club (NYSE:BJ) are well-positioned in a decelerating US retail landscape.
Evercore’s club survey results suggest Americans plan to renew at record high levels, with the lowest pushback on fee elasticity they’ve seen across our historic survey set.
“We favor Outperform rated COST for its likely fee hike in ’23 and potential special dividend, and we are raising our Base Case 2% to $540 (36x CY23 EPS). Sam’s Club looks good on renewal intention with positive
contributions to Walmart (NYSE:WMT) where it is a low teen percentage of the business,” wrote the analysts.
They also said the firm was impressed by renewal intentions at BJ’s, which have “moved up materially vs prior surveys and reflect improving merchandising, multichannel, and auto renewal.” Evercore initiated BJ’s with an In Line rating and a $70 base case price target.
“We are boosting our COST base Case as a result of today’s survey findings, as the company appears well positioned to continue compounding as traffic and renewal rates hit record highs, with the added survey insight that a fee hike is likely to be relatively well received by members while boosting earnings growth to double digits,” the analysts added.
