Costco falls on lowest U.S. sales growth in almost three years

Costco slipped as the second straight slowdown in a key monthly sales gauge stoked doubts about the strength of U.S. consumers.

U.S. comparable sales eked out only a 0.9% gain in March after excluding the impact of changes in gasoline prices, the company said in a statement Wednesday. That’s the smallest advance since April 2020 – shortly after the economic lockdowns at the start of the pandemic.

The tepid performance underscored the risk that Costco’s long sales boom is finally petering out. It also adds another sign of weakness in the U.S. economy after the Institute for Supply Management reported slower-than-expected growth in the U.S. service sector in March.

Costco’s March sales numbers “appear a reason for significant concern,” Greg Melich, an analyst at Evercore ISI, said in a note to clients Thursday. Still, based on long-term trends, Costco’s results may rebound in April and the retailer’s long-term prospects remain promising, he said.

The shares slid 3.7% at 10:01 a.m. in New York. Costco advanced 8.9% this year through Wednesday, topping the 6.5% gain in the S&P 500 index.

While Costco’s upscale customers have been less affected by inflation, the warehouse club isn’t immune to softer sales of discretionary items as shoppers spend more on basic goods and services such as travel.

Indeed, Costco said food sales were strong last month while non-food items flagged, with particular weakness in toys and seasonal goods, home furnishings and jewelry.

The retailer reported U.S. comparable sales of more than 6% in December and January, but that decelerated to 3.5% in February.