This Huge Retailer Might Be The Most Resilient - InvestingChannel

This Huge Retailer Might Be The Most Resilient

Proprietary Data Insights

Top Consumer Defensive Stock Searches This Month

Rank Name Searches
#1 Walmart 126,721
#2 Costco 120,476
#3 Target 115,046
#4 Coca-Cola 54,873
#5 Beyond Meat 43,577

Source: CouponBirds

It’s a sign of the times when a platform that specializes in helping people save money via coupon and promo codes chimes in with a meaningful study on personal finance. 

Gotta give CouponBirds some credit for the interesting data they collected after surveying 3,012 workers in May. 

Living Paycheck To Paycheck 

On average, it takes 14 days for workers in the U.S. to spend their paychecks each month. At this juncture, they’re hurting, often digging into savings to live out the remainder of the month. This helps support The Juice’s contention that cash-strapped consumers low on or out of savings have turned to credit card debt to survive or sustain discretionary spending. 

What’s Happening In North Dakota? 

The Juice looked for a clear answer. We simply couldn’t find one. But we’ll keep digging to figure out why North Dakota crushed every other state on this paycheck metric. 

It takes 28 days for the average North Dakotan surveyed to spend their paycheck. No other state, except for Hawaii (21 days) and including South Dakota (16 days), even made their money last more than 20 days. 

Other notables:

  • California and New York: 15 days
  • Texas: 14 days
  • Nevada, Iowa, Alabama, and Georgia: 9 days
  • New Mexico: 8 days

Right now, there’s no rhyme or reason to the discrepancies. And, even with more data from more variables, there might not be. The old personal finance is personal mantra might be the only thing we can be certain of, especially in uncertain times.


This Huge Retailer Might Be The Most Resilient

Key Takeaways:

  • Costco isn’t seeing the same pressure as the dollar stores or even Walmart.
  • In fact, it appears the company can count on a relatively strong consumer. 
  • COST might be another stock to consider on strength in a weak market. 


Earlier this week in The Juice, we considered data on personal savings and consumer debt alongside earnings results from Dollar Tree (DLTR), Dollar General (DG), and Walmart (WMT) and came to an educated conclusion: 

All of this info tells us large swaths of the population are hurting, spending their money on necessities such as food first. So discretionary spending, on things you don’t actually need, falls by the wayside. 

However, there’s a so-called discount retailer that doesn’t necessarily count on cash-strapped consumers looking for deep bargains. 

That’s Costco (COST)

The average Costco customer:

  • Asian American and female
  • Married, between 35 and 44 years old
  • At least a four-year college degree
  • Income greater than $125,000 a year 

Meantime, the average Walmart or Target (TGT) customer makes a relatively low $80,000 annually. Dollar General and Dollar Tree shoppers take in something closer to the $40,000-a-year range. 

The Resilient Costco Shopper

To highlight Costco’s strength in the “discount” retail space, we turn to the company’s May 26th earnings conference call. Just as we did DG, DLTR, and WMT. 

Cash-strapped consumers turn to the dollar stores. Makes sense. 

And whereas Walmart reports a spending shift from higher margin general merchandise (discretionary purchases) to lower margin groceries (necessity), Costco has not seen a worrying shift in consumer behavior. 

Here’s what the company’s SVP of Finance and Investor Relations, Bob Nelson, said when asked about this:

I mean, some of the areas I mentioned like sporting goods, well, all the gyms are opening up again and a lot of – within sporting goods, it’s really exercise equipment that – we sold a lot a year ago. And this year, people are back at the gyms. Office is down a little bit. And again, people were setting up working from home a year ago. So it’s no surprise to us that, that department is a little bit softer than a year ago. So not really, I think the categories that we’re seeing be a little bit softer than we expect or categories that we expected to be soft. It’s not a big surprise.

So the typical Costco customer is not shifting spending. 

In fact, the company reports store traffic increased 6.8% globally and 5.6% in the U.S., while average transaction size went up 7.6% worldwide and 10.4% domestically in the quarter. Revenue increased 16.3% to $51.61 billion from $44.38 billion. 

Buy On Strength?

We suggested considering DG and DLTR on strength, relative to their retail peers and the broad market, on their strong earnings reports. You might want to do likewise with Costco. 

Last week, around the company’s earnings report, the stock went on a nice run. 

Source: Google Finance 

Year to date, heading into earnings COST was down 17%. Since last week, the stock spent time in the $455-$465 before retracing its steps closer to $470.

The Bottom Line: We’re inclined to bargain hunt when markets tank. Makes sense. However, there’s equal opportunity in buying names that perform relatively well in bad stock markets. If this strategy resonates with you, like Dollar General and Dollar Tree, Costco might be worth more of your own due diligence.

Want to get content like this directly to your inbox?
Then we urge you to sign up for our newsletter here

Related posts

Carl Icahn Increases His Stake In Take-Two Interactive To 10.68%


iPad Mini Display Outperformed By Kindle Fire HD & Nexus 7


Foxconn Might Open Manufacturing Plants In The U.S. [REPORT]


Peter Cundill Protégé Tim McElvaine on Investing in Japan [VIDEO]


Set Bing Home Page Image As Lock Screen In Windows 8


Morning Market News: JCP, APO, MCHP, ZIP, ENR, LGF, EA, ATVI, COV, LNT