The market crash has driven stocks into a bear market panicking many investors as strong companies with solid results see their shares tank.
It’s a market that seems to have no safe havens as the vague specter of inflation has cast a dark shadow over the entire market, but pandemic stocks, technology companies, and the entire retail sector.
Costco (COST) – Get Costco Wholesale Corporation Report has not been immune to the drop. Despite the warehouse club operating pretty much as it always has, steadily adding members while retaining existing members, the chain has seen its share price fall 22.83% in the past six months.
That’s a big drop for a chain which has been a very steady stock, usually moving upward while also paying a dividend. Costco’s share price drop, however, has nothing to actually do with the company’s performance. Instead, the company has fallen victim to broad concerns about retail in general.
Target (TGT) – Get Target Corporation Report, for example, saw its shares lose over 25% in value after it reported first quarter results. The chain grew its same-store sales, which was impressive given that it had seen that metric rise by 22.9% in previous-year quarter. The retailer faltered when it came to profits as earnings were cut in half year-over-year due to rising costs and supply chain issue.
Never mind that Wall Street has taken Target’s strength for weakness (making money and gaining customers under these conditions is impressive), Costco shareholders have even less to be worried about.
Ting Shen/Xinhua via Getty
Why Is Costco So Strong?
Retail stocks, including Target and Costco, have suffered due to rising prices (inflation), supply chain issues, and fears over consumer spending drops. These are real concerns, but Costco has a lot of protection from those issues. The warehouse club operates on a membership model. Its profits come largely from selling memberships, not on the goods its sells its members.
Costco offers members the promise of low prices in exchange for a membership fee. The company offers a limited selection to keep prices down and it has enormous bargaining power with suppliers.
It’s possible that inflation will drive prices higher on some key Costco items, but …….