Tuesday 7 March 2023

Weaker Consumer Spending, Especially BIG TICKET, Impacting Costco

Costco’s sales growth continued to weaken during its second quarter, with the warehouse club operator missing analysts’ estimates as consumers made cutbacks amid persistently high inflation.

Having seen double-digit increases during the pandemic, Costco’s total comparable sales over the 12 weeks to 12 February rose 6.8%, excluding the impacts of changes in petrol prices and foreign exchange.

Comparable sales in its 584 outlets in the US rose 5.8%. The 107 stores in Canada saw a 9.6% rise, whilst its 157 overseas warehouses (including 29 in the UK) saw sales increase by 9.5%. However, the group’s e-commerce unit recorded an 8.7% decline as consumers reined in their spending and returned to shopping in physical stores.

The slowdown was highlighted in the latest figures for February, with total growth of only 5.0% after a much weaker performance in the US (+3.5%).

“We’ve seen some weakness in what I’ll call big-ticket discretionary items,” said finance chief Richard Galanti, adding electronics, jewellery and housewares, among others, were the worst performers in February and in the reported quarter.

Several US retailers have in recent weeks commented on how Americans have been changing their shopping patterns and seeking out more bargains and discounts as they deal with high inflation.

Retail bellwether Walmart warned last week consumers were increasingly shifting towards more food and consumable products, and away from general merchandise.

Galanti added: “Most major departments in general were down, with fresh foods being down a little more than others.”

NamNews Implications:

  • A global switch from consumer durables being experienced by most retailers.
  • Meaning consumers are postponing purchase…
  • …and ‘making do’ instead of replacing big-ticket items.
  • Those with long memories will recall 'Planned Obsolescence'...
  • The key issue is how long the consumer will forgo purchasing.
  • And IMO, anyone anticipating significant change within the next decade…
  • …should seek evidence to support their assumptions.
#BigTicket #PlannedObsolesence #Demand

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