Costco Wholesale Corp. (COST, Financial) stock rose 1.84% on Wednesday just days after investors initiated a selloff of the company's stock. The company's stock was under pressure following the announcement that Target Corp. (TGT, Financial) plans to compete against other retailers by slashing prices.
Tiffany & Co. (TIF, Financial) recently sued the company, alleging that Costco misled consumers when it marketed rings for sale as "Tiffany" rings. The company won a $19.4 million judgment against Costco.
Target published a press release on Friday announcing that the retailer would be cutting prices on thousands of its products to bring in new customers. Target's stock fell 2% following the announcement.
The selloff was premature, according to many investors. Costco relies heavily on the company's memberships to generate revenue and has a different business model than Target, which allows all consumers to purchase products in stores or online.
Costco additionally sells wholesale products to businesses in bulk.
Costco is also known for offering employees higher salaries. A report from KWQC-TV6 found that Costco jobs pay cashiers $10,000 more per year in Iowa than the average wage. The company's high salaries have helped keep employees working for the company and are known as a key reason that shoppers choose Costco over rival retail stores.
The company's signature brand, Kirkland Signature, accounts for over $25 billion of the company's annual sales. The brand competes directly with large manufacturers and offers high-quality products, including toilet paper, T-shirts, milk and dozens of other items.
Costco has chosen to introduce Kirkland products when it believes other brands aren't selling their products at the lowest possible price.
Kirkland Signature products make up a majority of the company's store shelves, allowing Costco to offer cheaper prices while maintaining high profit margins. The company's signature brand, one that no other retailer offers, is impossible for Target or other retailers to mark down in price to compete against the company.
Costco has been under increased pressure from retailers that hope to compete against the company's low prices.
The company's rally came on a day when the market remained quiet for Costco. Investors, shaking off the impact of Hurricane Irma and Harvey, and the selloff frenzy caused by Target's announcement, were repurchasing shares.
Costco shares fell nearly 2% following Targets announcement and have risen over 3.6% since Friday. Costco's stock remains down in the trailing 90-day period after Amazon (AMZN, Financial) announced that it was purchasing Whole Foods Market (WFM, Financial).
Disclosure: Jacob Maslow does not have any stake in the listed equities.
