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Costco (COST) Witnesses Dismal Comparable Sales in May

Consumer spending activity, which is one of the pivotal factors driving the economy, has somewhat slowed down. This is because inflation and recession-wary shoppers have curtailed spending. Underlying price pressure and a higher interest rate environment have cooled demand. This was prominent in Costco Wholesale Corporation’s COST sales results for May.

May Sales Disappoint

Costco’s net sales increased 1.2% to $18.45 billion for the retail month of May from $18.23 billion last year. However, the rate of growth decelerated from the improvement of 3% witnessed in April.

Comparable sales for the retail month of May — the four-week period ended May 28, 2023 — declined 0.3%. This followed an increase of 1.4% registered in April. Comparable sales for May reflected a decline of 1.5% in the United States but an increase of 0.5% and 5.5% in Canada and Other International locations, respectively.

Zacks Investment Research
Zacks Investment Research


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Excluding the impacts of changes in gasoline prices and foreign exchange, comparable sales for the month under discussion rose 3.3% on improvements of 1.7%, 7.9% and 6.4% in the United States, Canada and Other International locations, respectively.

We note that Costco’s comparable e-commerce sales fell 7.6% year over year. Excluding the impact of gasoline prices and foreign exchange, the same declined 7% year over year.

Conclusion

One of the widely recognized names in the industry, Costco has been providing its members with quality goods and services. The company, which is among the biggest winners amid the pandemic, sells products at discounted prices to draw customers who have been seeking both value and convenience. However, being a consumer-centric company, the warehouse retailer is not fully immune to headwinds impacting consumers’ spending activity.

We note that shares of this Zacks Rank #3 (Hold) company have risen 12.3% so far in the year against the Retail – Discount Stores industry’s decline of 1.1%.

3 Picks You Can’t Miss Out On

Here we have highlighted three better-ranked stocks, namely Kroger KR, The TJX Companies TJX and General Mills GIS.

Kroger, which operates as a supermarket operator, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Kroger’s current financial-year revenues and EPS suggests growth of 2.5% and 6.6%, respectively, from the year-ago reported figure. Kroger has a trailing four-quarter earnings surprise of 9.8%, on average.

TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 10.5%.

The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5% from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.

General Mills, which manufactures and markets branded consumer foods, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 7.5%.

The Zacks Consensus Estimate for General Mills’ current financial-year sales suggests growth of 6.3% from the year-ago period. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.

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The TJX Companies, Inc. (TJX) : Free Stock Analysis Report

General Mills, Inc. (GIS) : Free Stock Analysis Report

The Kroger Co. (KR) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

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Zacks Investment Research