In this piece, I evaluated two big box retail stocks, Costco Wholesale Corporation (COST – Get Rating) and BJ’s Wholesale Club Holdings, Inc. (BJ – Get Rating), to determine the better investment.
Following a two-month consumer spending slowdown, April’s spending increased by 0.8%, a sign of economic resilience amid rising prices. Also, the core Personal Consumption Expenditure (PCE) index rose 0.4% sequentially and 4.7% year-over-year in April.
Retail sales rebounded in April by rising 0.4% sequentially and 1.6% year-over-year. The retail sales came in lower than the 0.8% consensus estimate. According to the National Retail Federation, retail sales will grow between 4% and 6% in 2023 to reach between $5.13 trillion and $5.23 trillion.
These signs of economic resilience may prompt the Fed to hike rates this month. Another rate hike will push the federal funds rate, which is already at a 16-year high, higher. The high benchmark interest rate and tighter lending standards will likely tip the economy toward a recession, forcing consumers to cut their discretionary spending and pressure big-box retailers.
COST’s EPS was $0.37 lower than the consensus estimate during the third quarter. Its revenue also missed the consensus estimate by $1.01 billion. Moreover, same-store sales rose 0.3%, coming much below analyst estimates of 2.9%. Although its membership fees rose 6.1% year-over-year to $1.04 billion, it was…
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