I Like Costco Here

Costco (COST) this morning announced -2% same store sales growth for January and that 2Q earnings for the period ending February 15, 2009 are expected to be "substantially below" consensus estimates of 70 cents a share (COST Press Release ).  As a result, shares are off almost 7% on pretty good volume to a 52 week low.

I like Costco at these prices.  First, same store sales aren’t as bad as they seem.  Costco is being buffetted by two macro forces: falling gas prices and the strengthening dollar.  Remove those two factors from the comparison and same store sales were actually up 5% from last January.  What that tells me is that Costco’s core business is still very strong.

Second, valuation is pretty attractive here in my opinion.  Costco shares haven’t traded at these levels for about 4 years.  Also, this is probably something like a 14 or 15 multiple on Costco’s earnings for this fiscal year which is great for a leading, category killing company like Costco.

I added substantially to our position today.

Disclosure: Top Gun is long shares of Costco (COST).

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