Costco backs up its status as a retail winner during a cloudy time for economy

Published Thu, Apr 10 20253:25 PM EDT

Costco delivered fresh evidence that it is beloved place to shop in an uncertain economy — and that's exactly why investors need to keep the stock in their portfolio, too. The news Costco on Wednesday night reported strong March sales across all categories except for its so-called ancillary business, which was impacted by lower gasoline prices. U.S. comparable sales — excluding foreign exchange fluctuations and gasoline — rose 8.7%, beating estimates of 6.8%. On a companywide basis, comparable sales were up 9.1%, topping the 6.9% consensus. The retailer's results benefited from an extra shopping day, thanks to the timing of the Easter holiday a year ago. The numbers covered a period of time in which concerns mounted about the inflationary impact of President Donald Trump's tariff policies, as well as their implications for economic growth overall. A potential pickup in inflation due to tariffs is something that can benefit Costco and make its membership more attractive to shoppers, analysts at Loop Capital said in a note Wednesday before the March sales were released. In a note Thursday reacting to the March numbers, analysts at Telsey Advisory Group offered a similar thesis, writing that "Costco's defensive product mix and focus on value should help win customers in this rising cost environment." Costco has an upper hand when navigating tariffs due to its ability to source products from around the globe, Telsey argued. The analysts also pointed to management's comments on its early March earnings call that roughly one-third of Costco's U.S. sales are imported, with less than half of that total coming from China, Mexico and Canada. Telsey maintained an outperform buy rating and price target of $1,100 on the stock. COST .SPX YTD mountain Costco Wholesale's year-to-date stock performance versus the S & P 500. Big picture It's a tricky time for retailers, with heightened concern over tariffs, their impact on inflation and the potential for a U.S. recession. Consumer confidence has softened in recent months against this backdrop, with a key sentiment gauge from the University of Michigan declining 11.9% in March from February. It's too early to say how Trump's 90-day tariff pause announced Wednesday will change these dynamics, particularly because he actually increased the duty rate on imports from China. It now stands at a cumulative 145% since he returned to the White House. Club name Amazon CEO Andy Jassy told CNBC earlier Thursday he expects its network of third-party sellers to trying passing the cost of the tariffs on to consumers . In this kind of uncertain environment, shoppers will likely continue looking to Costco's stores for better prices. Also helping steer Costco's success is the strength of its Kirkland Signature brand , which is becoming a growing portion of the company's overall sales. Shares of Costco were moderately lower in afternoon trading Thursday, giving up earlier gains, as the broader market saw its losses accelerate. Still, the stock is up roughly 5% year to date, in a sign of its resilience in a tough year for equities. Costco has been one of our best stocks this year alongside fellow retailer TJX Companies, which also benefits from its focus on offering value to shoppers. Shares of the TJ Maxx parent company are on track for an all-time closing high Thursday. The company also is slated to capitalize off Trump's tariff measures as it potentially leads to more quality discounted inventory from traditional retailers. Bottom Line Investors ought to stick with Costco. "It has been a mistake to sell every single time," Jim Cramer said during Thursday's Morning Meeting. Jim has previously called Costco one of the portfolio's "most defensive" companies as investors grapple with the current atmosphere, and its recent stock performance backs up that assertion. In a brutal April for stocks, Costco is one of five Club names in positive territory. On Thursday's Morning Meeting, Director of Portfolio of Analysis Jeff Marks pointed to Costco's bargaining power with vendors, citing that as one of the ways Costco keeps prices competitive for shoppers. "I think Costco works in any type of economy," Jeff said. (Jim Cramer's Charitable Trust is long COST and TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A shipping truck departs a Costco Wholesale Corp. location in Bayonne, New Jersey, US, on Friday, Oct. 4th, 2024.

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