Costco shares fall after June sales update, Bank of America remains bullish

Yahoo Finance ·

Proactive financial news and online broadcast teams provide fast, accessible, informative and actionable business and finance news content to a global investment audience. All our content is produced independently by our experienced and qualified teams of news journalists. Proactive news team spans the world’s key finance and investing hubs with bureaus and studios in London, New York, Toronto, Vancouver, Sydney and Perth. We are experts in medium and small-cap markets, we also keep our community up to date with blue-chip companies, commodities and broader investment stories. This is content that excites and engages motivated private investors. The team delivers news and unique insights across the market including but not confined to: biotech and pharma, mining and natural resources, battery metals, oil and gas, crypto and emerging digital and EV technologies. Proactive has always been a forward looking and enthusiastic technology adopter. Our human content creators are equipped with many decades of valuable expertise and experience. The team also has access to and use technologies to assist and enhance workflows. Proactive will on occasion use automation and software tools, including generative AI. Nevertheless, all content published by Proactive is edited and authored by humans, in line with best practice in regard to content production and search engine optimisation. Costco Wholesale Corporation (NASDAQ:COST, XETRA:CTO) shares fell about 4% to $913 on Wednesday after the warehouse retailer reported a moderation in June comparable sales growth, though Bank of America analysts maintained their ‘Buy’ rating, arguing the company's value-focused strategy and affluent customer base should continue to support market share gains. For the five weeks ended July 5, total sales rose 10.6%, while US comparable sales excluding gasoline increased 7.6%. Bank of America noted the result represented a slowdown on both a one-year and two-year stacked basis following a stronger May. The analysts wrote that Costco's "philosophy of leading with value and its weighting towards a higher income consumer gives us confidence share gains across categories will continue." Non-food comparable sales increased by a mid- to high-single-digit percentage, driven by jewelry, home furnishings and major appliances. Management also highlighted higher prices in consumer electronics and appliances due to inflation in memory chip prices. Fresh food comparable sales rose by a mid-single-digit percentage, supported by bakery and meat, while food and sundries posted low- to mid-single-digit growth led by food, candy and frozen products. Overall inflation remained in the low- to mid-single-digit range, with food inflation at the lower end due to egg price deflation and non-food inflation at the higher end because of rising memory prices. Customer traffic increased 3.2% during the month, easing from 3.9% in May, while average ticket growth excluding gasoline and foreign exchange was 3.7%, compared with 4% in the prior month. Bank of America also noted Costco is now lapping the rollout of extended shopping hours introduced last July for executive members and later for all members. Management previously estimated the additional hours contributed roughly one percentage point to weekly US sales following their introduction. Elsewhere, ancillary sales growth slowed as gasoline prices eased, while comparable sales growth moderated in Canada and other international markets. Digital comparable sales remained strong, rising 21.5% in June and improving sequentially from the previous month. The analysts also noted Costco shifted its member appreciation days to coincide with Amazon's Prime Day and other competing promotional events.

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