(Reuters) — Danish hearing aid company GN Store Nord (CPH:GN) said it extended a supply agreement with U.S. retailer Costco (NSDQ:COST), removing a major risk to its business model and sending its shares 4% higher.
It avoids the fate of rival Danish hearing aid maker William Demant (CPH:WDH), which had to cut its 2014 earnings forecast in November after its products were displaced by rivals in Costco stores.
It is especially important as Costco sales of hearing aids have outpaced the market average, analysts said.
"Losing the contract would have reduced the sale of GN ReSound hearing aids by 6%," Jyske Markets wrote in a note to clients today, following GN Store Nord’s announcement.
Bernstein analyst Lisa Bedell Clive said Costco now accounts for around 10% of all volumes sold in the U.S. private market. Sydbank analysts reckon Costco sales have been growing by 20% a year in the last 5 years.
"As we expect this channel to continue growing strongly in the coming years, it is an attractive channel to be involved in for the hearing aid manufacturers," Bernstein’s Clive wrote in a note.
GN Store Nord shares rose 4.2% to 153.20 DKK (about $23.34), having earlier hit their highest level since July 2014.
"We have faith in our pipeline which we count on to deliver a technological lead," he told daily Berlingske on the weekend.