Costco's May Core Comp Modestly Below Expectations, Despite Healthy Traffic

Analysts at JP Morgan reiterate their "overweight" rating on Costco Wholesale Corporation COST. According to JP Morgan, Costco's “core comp of ~3.5% (ex-gas/FX and calendar shift) represented a respectable uptick sequentially from the 2.0% result in April, but still fell modestly below our 4.0% expectation. Of some concern, the 2-yr. core was soft/below the recent trend line; we suspect that last month's culprits to be at play again, including: choppiness in CA (~40% of volume), less robust MVM's year-over-year, and an overall tighter basket size. Positively, traffic remained healthy (+3.5%) and food prices were slightly inflationary during May (similar to April). Net, the results while certainly not a debacle by any stretch follow a similar tone to April's disappointing results. “US strengths in the Texas, Midwest, Southeast and Northwest Korea and Canada were best internationally…. Food prices remained slightly inflationary during May, similar to April results, and above the ~1.5% negative impact in March,” the analysts add. More Analyst Ratings here