What To Make Of Costco's May Sales

Costco Wholesale Corporation COST said Wednesday afternoon total sales for the month of May rose 5.9 percent year over year to $11.67 billion and comparable sales rose 4.2 percent.

Multi-Year Trends Intact

Costco's May comps of 4.2 percent represents a deceleration from March and April's combined 6 percent gain due to a deceleration in traffic, Baird's Peter Benedict said in a note. Taking a step back shows global and U.S. trends on two-year and three-year stacks remain stable.

Costco's May performance remains "healthy" versus most of the retail sector, which Benedict said implies its low-price strategy on high-quality merchandise and loyal customer base will result in continued market share gains.

Benedict maintains an Outperform rating on Costco with a $270 price target.

Slowdown 'Coming To Fruition'

Costco's global comp growth of 4.3 percent missed expectations by 10 basis points while the core U.S. comp rose 4.4 percent represents a deceleration on a two-year stacked basis, Wells Fargo's Edward Kelly said in a note. Traffic growth in the U.S. of 2.3 percent is the lowest seen in "some time."

While the case can be made there is "nothing wrong" with May's performance, Kelly said the results "clearly" demonstration decelerating trends. As such, a slowdown in the business "may finally be coming to fruition."

Kelly maintains at Market Perform with a $240 price target.