So I know I'm a couple of days late, but on Monday Punxsutawney Phil (the most famous groundhog ever) saw his shadow, thus predicting another six weeks of winter.
Interestingly, in a similar ceremony held this morning in Issaquah, Washington, my friends at Costco confirmed Phil's bleak outlook. The company came out with comparable store sales of -2% ... not horrid when you consider that gasoline price declines hurt sales by 4% in the US and the strong dollar accounted for an 18% (yes, eighteen percent, that's not a typo) swing in International comparable sales from 9% in local currencies to -9% in dollars. But still, not good. Even worse, earnings for this quarter are going to be 'significantly' below the $0.70 estimated by Wall Street pundits and the company is withdrawing guidance for the rest of the year. 'Significantly' translated to 10% below expectations last quarter... but the company isn't offering interpretations this quarter. Let's just call it yucky and move on.
More of an issue than sales were margins on discretionary items. Let's face it, even though Costco got good pricing on some fabulous items, they were competing against mainstream retailers that were quite literally willing to give away the shirts on their racks in order to clear inventory. One example is the cashmere sweaters they had in the Issaquah store. They arrived in November with a price of about $69. Normally, they would have sold like hot cakes at the original price, but these are not, if you haven't noticed, normal times. By Christmas they were about $49. The killer, though, was that in mid to late January there were STILL cashmere sweaters for sale. Maybe cashmere is 'out' right now. I noticed it wasn't selling well at Macy's either. But more likely, Costco's 'bargain' price didn't look as bargain-ish when compared to the discounts the mainline retailers offered. Thank goodness they sell food too, which drove the frequency of customer visits to a high 4%.
Bottom line for me, though, is that if Costco which sells food/staples (~60% of revenue) and discounted discretionary items (~40% of revenue) is having issues, we are obviously still smack dab in the winter of our discontent. It doesn't appear likely that the sun, my friends, is going to shine on the consumer in the near term - literally or figuratively.