Costco Reports Sales Growth Slows as Consumers Reduce Discretionary Purchases

Costco’s comparable sales growth has slowed as consumers reduce their purchases of discretionary items.

The membership warehouse club’s comp sales rose 0.3% year over year during the quarter that ended May 7, Costco said in a Thursday (May 25) earnings release.

Bigger-ticket discretionary items like furniture and consumer electronics are “getting hit arguably more than others,” Costco Executive Vice President, Chief Financial Officer and Director Richard Galanti said Thursday during the company’s quarterly earnings call.

Customers are still buying non-discretionary items like food and sundries, Galanti said.

They’re also buying apparel “in a big way” and patio furniture as the weather warms up, Galanti added.

“Indoor furniture, not as much,” Galanti said.

“We all know what’s going on with consumer electronics out there,” Galanti added. “While all the numbers industrywide are down, ours are down a little bit less, but they’re down.”

PYMNTS reported on May 16 that consumers have been pulling back on some key categories of discretionary spending.

Data released on that day by the Commerce Department showed that on a seasonally adjusted basis, April saw sales declines of 3.3% in sporting goods, 0.5% in electronics stores, 0.7% in furniture, 0.3% in clothing and accessories, and 3.3% in sports and hobbies — all of which are categories that represent discretionary purchases.

By region, Costo’s comp sales were down 0.1% in the United States, down 1.0% in Canada and up 4.1% in other international markets, according to the Thursday earnings release.

The company’s eCommerce sales fell 10% during the quarter, the release said.

Asked by an analyst if Costco is willing to roll back prices to drive traffic and sustain mid-single-digit comp growth, Galanti said during the call that the company has done as good a job as anyone to lower prices and work to drive sales.

“I feel we’re doing a great job of being very competitive,” Galanti said. “When we do comp shops against our direct warehouse club competitors as well as different components, whether it’s retail food or general merchandise on the home improvement side, we feel very good about our competitive position and what we’re doing to do that.”