In the coming months, Costco (COST-US) bulky shelves of bulk foods may give shoppers the perception that prices have dropped.
The storage giant told analysts on Thursday’s after-hours earnings call that inflation was in the growth range of 5-6% in the latest quarter, a slowdown from the 6-7% range seen in the previous quarter. .
Costco Chief Financial Officer Richard Galanti (Richard Galanti) added that inflation growth will cool further at the end of the quarter, “many items have improved.” But there will continue to be some relief, like chicken, bacon, butter, steel, resin, nuts.”
High inflation and an uncertain macroeconomy weighed on sales of big-ticket items such as televisions during the quarter.
The company’s operating margin also fell to 3.44% from 3.49% a year ago due to inflation from various expense items.
At the same time, professionals believe that any slowdown in Costco’s inflation this year could help spur sales of more expensive products while easing expenses and boosting profits.
That would be another reason to be bullish on Costco stock.
“Despite a slowdown in discretionary spending, Costco is still adding new members, expanding market share and prioritizing member benefits,” EvercoreISI analyst Greg Melich wrote in a note. Citto’s increased membership stickiness, record renewal rate, strong execution, and dual catalyst path make it a top pick at the heart of a U.S. retail deceleration.”
Costco isn’t the only company offering long-sought inflation relief.
As of now, according to FactSet,S&P 500 IndexThe number of constituents mentioning inflation on earnings calls fell 20% sequentially this earnings season.
Abercrombie & Fitch (ANF-US) CEO Fran Horowitz (Fran Horowitz) said, “Shipping costs have definitely come down.” We expect some of these costs to be reduced in the second half of the year.”
