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March 29, 2024
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Concerns arise over US economy as Costco reports weaker sales growth

Costco Wholesale Corp. witnessed a decline in its shares following the company’s slowest growth in US sales in nearly three years. The monthly sales gauge registered a second consecutive slowdown, raising concerns about the robustness of US consumers. In March, US comparable sales saw a meager 0.9% increase, excluding the impact of fluctuations in gasoline prices. This marks the smallest rise since April 2020, during the early days of the pandemic’s economic lockdowns.

Concerns arise over US economy as Costco reports weaker sales growth

The sluggish performance highlights the possibility of Costco’s extensive sales boom coming to an end. The US economy’s weakness is further evidenced by the Institute for Supply Management’s recent report indicating slower-than-anticipated growth in the US service sector for March. Evercore ISI analyst Greg Melich expressed considerable concern over Costco’s March sales numbers, but remained optimistic about the retailer’s long-term prospects and the potential for an April rebound.

Costco’s shares dropped by 3.7% in New York. However, the company’s performance this year, with an 8.9% increase through Wednesday, surpasses the 6.5% gain in the S&P 500 index. Despite Costco’s upscale clientele being less impacted by inflation, the warehouse club is not entirely protected from reduced sales of discretionary items as customers prioritize spending on essential goods and services, including travel.

Last month, Costco reported strong food sales, while non-food items experienced weaker sales, particularly in toys, seasonal goods, home furnishings, and jewelry. The retailer’s US comparable sales exceeded 6% in December and January but slowed to 3.5% in February.

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