Costco’s sales growth continued to weaken during its third quarter as consumers made cutbacks on non-essential spending amid persistently high inflation.
Having recorded double-digit increases during most of the pandemic, the warehouse club operator’s total sales increased only 1.9% to $52.60bn during the 12 weeks to 7 May.
Comparable sales in its 587 US outlets were up 1.8% as cash-strapped consumers reined in their spending on high-value items such as home furnishings, jewellery, toys and electronics.
There was better performance in Costco’s international markets, with its 107 stores in Canada seeing a 7.4% rise. Meanwhile, its 159 warehouses across Europe and Asia (including 29 in the UK) saw sales increase by 8.4%
However, the group’s e-commerce unit recorded a 9.0% decline as consumers returned to shopping in physical stores.
Costco’s net income for the quarter fell from $1.35bn to $1.30bn, partly due to a non-recurring charge to merchandise costs of $298m.
Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, commented: “Costco’s solid value proposition and loyal customer base were not enough to capitalise on economic fears, even with their well-priced mix of name brands and in-house Kirkland labelled products.”
Earlier this month, Walmart upped its annual sales and profit targets as its focus on low-priced groceries and other essentials helped it report better-than-expected quarterly results. They were in stark contrast to rivals in the US, such as Target and Home Depot, which have issued bleak forecasts due to weak consumer demand.
NAM Implications:
- Big ticket, not foods, have to be a casualty when people are struggling to live.
- So ‘making do’ has to be the option.
- But being global helps.
- And cost-conscious Costco need have no long-term worries…
