Costco Wholesale (COST) reported earnings for its fiscal first quarter of 2024 and declared a long anticipated special dividend of $15 a share. The stock closed up 4.61% on Friday, December 15.
More woe for the retail sector this morning BJ’s Wholesale (BJ) reported first-quarter results before the market open that missed expectations for same-store sales growth (with earnings per share matching estimates.) The big killer, though, was guidance from the company that said second-quarter comparable store sales are tracking below the 5.7% increase in the first quarter. That 5.7% growth in first-quarter comparable store sales was below the 5.9% that Wall Street analysts had expected. The stock closed today down 7.26% on the day.
10 Picks for the Coming Recession. This one is especially difficult. Not only do I face the usual crystal-ball problem that comes up whenever you try to pick an investment for the future–what’s the macro and micro world going to look like in 6 months or a year from now–but I’ve got two big Recession-specific challenges. First, is there actually going to be a Recession in 2023? All the signs, in my opinion, point toward a recession in the second and third quarters, but it’s by no means guaranteed that we’ll have the two quarters of negative GDP growth that’s required by the minimal definition of a recession. And what’s the point, you might well ask, of making picks for a coming recession that never arrives? And, second, how bad will this recession be?
This week’s Trend of the Week is How Tired Is the Consumer? Consumer spending makes up 70% of the economy, so if consumers get tired and start spending less, the economy as a whole will slow down. The current consumer data doesn’t look good. Credit card debt is at an all-time high and delinquency rates are up to 4%. On February 21, Walmart (NYSE: WMT) came out worried about the full year, noting that consumers were purchasing less-expensive goods, and lowered its guidance for 2023 below Wall Street expectations. However, the lowered guidance didn’t affect the stock price. Why? As consumers are looking more tired, investors will look for stocks like Walmart and Costco, where a consumer would go to substitute products with lower prices. If you’re looking to put some money somewhere if the consumer is looking tired, Costco (NASDAQ: COST), Wal-Mart (NYSE: WMT) and Dollar General (NYSE: DG) are good options. If you believe the consumer is REALLY tired, you may want to look to put your money somewhere outside of the market, like a CD with a 5% yield. For other 5% options, check out my recent post “The best way to get a 5% yield–my choices and their pluses and minuses”: https://www.jubakpicks.com/the-best-way-to-get-a-5-yield-my-choices-and-their-pluses-and-minuses/.
This week’s Trend of the Week: Christmas? Bah Humbug! Harris recently did a poll for Bloomberg that showed 60% of the people polled said they would be buying fewer gifts for fewer people this year due to inflation. That same poll said that 60% of respondents said they’d be cutting back on holiday travel, and 33% said they were skipping gift-giving completely. We’ll skip the discussion about the spirit of Christmas, and look at how this is going to affect retail and airline earnings in January. Retailers like Costco, Wal-Mart, and Kohl’s have already warned Wall Street that sales will not be great for Christmas, but even with that warning, retailers could surprise investors with lower-than-expected numbers. Costco announced its fiscal first-quarter earnings on December 10 with sales going up 6%. Although they were warned that margins were going to be soft, Wall Street was expecting 6.9% same-store growth and punished the shares accordingly with a huge drop in the stock. Costco is a great retailer for this moment, with affordable pricing on a wide range of goods and gas sales bringing in traffic. If Costco’s trending this way, I think we can expect the same from companies like Walmart and Kohl’s. It’s likely the airlines will take a hit as well, with the drop in holiday travel. For now, drink your wassail and try not to think about impending January earnings!
After the market close on October 5, Costco Wholesale (COST) reported that sales for September had climbed 10.1% to $21.46 billion. Total same-store sales rose 8.5% in September, beating Wall Street’s estimate of 6.3% growth.
Shares of Costco Wholesale closed up 2.98% on September 26. The advance against the grain of a generally down market comes after the company announced a beat on both revenue and earnings for its fiscal fourth quarter on Thursday, September 22.
It’s not surprising given the greater than expected decline in U.S. first quarter GDP reported on Wednesday, which followed on the slump in consumer confidence reported Tuesday, that stocks in the consumer staples sector outperformed both consumer discretionary stocks and the market in general. The Consumer Staples Select Sector SPDR ETF (XLP) gained 0.63% on Wednesday, June 29. By contrast the Consumer Discretionary Select Sector SPDR ETF (XLY) lost 0.08%.
Target (TGT) cut its profit outlook for the second time in three weeks. The company will attack oaring inventories in discretionary categories such as home furnishings with price mark downs, cancelling orders from vendors, and “off-loading excess inventory. (To deep discount sellers, I’d assume.) Three weeks ago, on May 18, the retailer’s shares slumped more than 25% after reporting that net profit shrank 52% in the first quarter. In those quarterly results, Target said its inventory rose 43%, compared with a year earlier.
In its guidance for the second quarter on May 18 Target said operating margins for the second quarter would be in a range centered around 5.3%. In today’s inventory warning the company said that orating margin would fall to 2%. Target’s stock, which fell as much as 7% today on the news, closed down 2.22% today. Shares of competitors Walmart (WMT) and Costco (COST) were down only 1.24% and 0.15%, respectively.
As of 3:30 p.m. Wednesday May 18 shares of Target (TGT) were down 25% for the day after the company reported a big earnings miss for the first quarter. Let’s be clear. The sales picture at Target was very positive for the quarter. Same store sales were up 3.3% in the quarter. That was about three times higher than Wall Street analysts had expected. Revenue was up 4%. Here again Target’s $25.2 billion in revenue beat expectations for $24.3 billion in revenue. But earnings were terrible at $2.19 a share versus forecasts for $3.05 a share.
In this post let me take another step back to look at the one of the larger economic forces revealed by the Netflix miss. I’d argue that the Nexflix miss should put pricing power and questions of what price increases will hurt demand up near the top of your stock picking check list. Especially since the streaming service’ loss of 200,000 subscribers this quarter and the ported loss of 2 million subscribers next quarter qualifies as just the first shoe to drop.
Tesla (TSLA) announced today that it will ask shareholders for permission to split its stock. No news yet on what the ratio of the split will be, but on the news shares of Tesla were up 8.03% at the close today, March 28, to $1,091.84.That split comes on the heels of splits from Amazon (AMZN) and Alphabet (GOOG). Which leads me to conclude that it’s time to buy shares of Costco Warehouse (COST).
