Costco falls after disappointing March sales; Analyst flags slowing momentum

(Updated - April 6, 2023 6:51 AM EDT)

Investing.com -- Costco (NASDAQ: COST) stock fell in premarket after the wholesaler reported a further slowdown in sales in March, in the latest sign of U.S. consumers tightening their belts as the economy slows.

Net sales were $21.71 billion in the five weeks ending April 2nd, a meager 0.5% higher than a year earlier, while comparable sales fell 1.1%. While the slowdown was exaggerated by a fall in gasoline prices, underlying comparable sales also failed to keep pace with inflation, rising just 2.6% on the year.

Headline consumer price inflation, by comparison, was running at 6% in March. Costco's own sales had still been up 5.2% on the year in the three months through February.

The slowdown was particularly marked in the U.S., where sales rose only 0.9% from a year earlier. Sales in Canada were up 7.4% and sales across the rest of the world rose 7.6%.

The group's e-commerce operations, meanwhile continued to suffer from the unwinding of pandemic-driven factors. They were down nearly 12% from a year earlier, as consumers reverted to visits to physical stores.

Wells Fargo analyst Edward Kelly highlighted "slowing momentum" as "general merchandise takes another step back."

"March comps missed expectations as strength in consumables was offset by a MHSD decline in gen merch. While traffic remained positive, ticket weakened. We remain sidelined given our concerns about slowing momentum and earnings risk."

By 05:50 ET, Costco stock was down 1.9% from Wednesday's close. It's lost around a third of its value since peaking in April last year.

By Geoffrey Smith and Senad Karaahmetovic

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