Costco's March Sales Dip: Analysts Attribute Decline To Sluggish Discretionary Spending

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Costco Wholesale Corporation COST with a price target of $540.
Costco reported a softer-than-expected March comparable sales decline of 1.1%, missing the analyst’s forecast of 1.5%.
Excluding the gas and FX net headwind of about 370 basis points, the core merchandise comparable sales came in at 2.6% versus the analyst’s projection of 4.0%.
In March, total traffic increased 4.6%, while the average ticket fell 5.8% due to soft sales in big ticket products, like furniture and electronics.
E-commerce sales decreased 12.7% versus growth of 8.9% last year, reflecting its skewed nature toward discretionary categories like electronics and furniture, which were soft in this tough economic environment.
The analyst projects an April comp of 2.5% versus 12.6% last year, with a gas and FX net headwind of 250 basis points.
While March was pressured by discretionary weakness, Costco continued to generate strong traffic driven by consumables, noted the analyst.
The analyst expects Costco to remain a share gainer, with its value-focused merchandising and high member loyalty.
In FY23 and FY24, Costco should continue to generate double-digit EPS growth, driven by a mid-single digit comparable sales, high-single digit membership fee income growth, leverage of customer data, and effective management of merchandising and costs.
Price Action: COST shares are trading lower by 2.46% at $484.92 on the last check Thursday.

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