Updated Aug 7 at 11:18am ET.
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US employers cut 23,000 jobs in July, a sharp turn from the 80,000 gains that analysts expected. Hiring numbers for the two months before were also revised lower, suggesting the labor market is losing steam faster than previously thought.
For a retailer like Costco, a cooling job market is a double-edged sword. While its focus on bulk value and groceries usually protects it during downturns, a broader slowdown in hiring can eventually weigh on how much members spend on non-essential items like electronics or jewelry. We are watching to see if this trend continues, as it could test the resilience of the company's recent sales growth.
Source: Bloomberg Markets and Finance
Costco brought in $23.12 billion in sales during the four weeks of July, a 10.7 percent increase over the same period last year. This brings its total sales for the first 48 weeks of its fiscal year to $273.55 billion, which is about 10 percent higher than where it stood at this time last year.
These monthly updates are a helpful pulse check on how much members are spending. Because Costco makes most of its profit from membership fees rather than markups on products, steady sales growth shows that members are still finding value in their subscriptions. This consistent double-digit growth suggests the business is successfully keeping its shoppers loyal even as it scales.
Source: GlobeNewsWire
As more employers stop covering expensive weight-loss drugs like GLP-1s, shoppers are increasingly looking for ways to buy them directly. Large retailers like the company are moving quickly to offer these prescription programs, which could draw in more members and take business away from smaller, independent pharmacies.
This is a smart move because it adds another reason for people to keep their annual memberships. For a business that makes nearly all its profit from membership fees rather than markups, adding a high-demand health service helps ensure shoppers stay in the ecosystem and continue paying their yearly dues.
Source: CNBC
The China Beige Book, a firm that tracks the Chinese economy, is reporting signs of weakness in consumer spending. This is a notable data point for Costco because the company is currently relying on China as a major part of its future growth plan, opening several new warehouses there to tap into a massive middle class.
While Costco's low prices often help it perform well when shoppers are watching their budgets, a broader economic slowdown in China could make it harder to hit growth targets. We are watching this closely because the company's high valuation is partly based on its ability to successfully expand into new international markets.
Source: CNBC Television
Costco sells gas at prices noticeably below most competitors, and that has made its pumps a genuine draw that pulls members in. The stations have become so crowded that the company is now testing a new format: gas stations that stand on their own, not attached to a warehouse. This matters because cheap gas is one of the membership perks that keeps renewal rates above 90 percent. Finding ways to expand that perk without needing a full new warehouse is a creative way to grow the value of membership without the cost of building a whole new store.
Source: WSJ
Analysts have steadily raised their price targets for Costco throughout the spring and summer. Most analysts are bullish, with 38 of 58 rating the stock a buy and an average target price suggesting 17% upside from current levels.
Costco has a remarkably consistent habit of clearing the bar analysts set for it, rarely missing by more than a few cents. It's a sign of a management team that has a very tight grip on its costs.
| Expectation | |
|---|---|
| EPS | $6.56 |
| Revenue | $94.52B |
