Fallout: The Financial Crisis

Why Costco’s sales have dropped

Janet Babin May 7, 2009
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Fallout: The Financial Crisis

Why Costco’s sales have dropped

Janet Babin May 7, 2009
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TEXT OF STORY

Tess Vigeland: Apparently we all did a little more shopping last month than we’ve been doing. Thompson-Reuters reports that retail sales rose more than a percent in April over last year. Walmart posted a sales gain of 5 percent. But in this economy even good news needs to be taken with a grain of salt. And we’ve got that too. Same-store sales at discount mecca Costco dropped more than expected last month. A lot more. From North Carolina Public Radio, Janet Babin explains.


JANET BABIN: You were supposed to be stocking up paper towels and dish soap. But now you’re leaving Costco with a $300 propane patio heater. Well, hey, it does get chilly at night, and it was 70 percent off retail. Britt Beemer with America’s Research Group says that’s how Costco makes its money.

Britt Beemer: Costco has been brilliant in their merchandising of giving consumers incredible deals on things that they may not need to buy but things they may want to buy.

Like patio heaters, flat screen TVs and a case of Bordeaux. But that’s changing. Costco’s same store sales dropped 8 percent in April.

Beemer: The consumer today according to our research is not buying anything other than what they have to have.

Costco’s earning also took a hit because it sells a lot of gas and prices have cratered since last year. And the company has a lot of stores in the Southwest. Edward Weller is an analyst with ThinkEquity Partners.

Ed Weller: They are wildly overexposed to California and the West. That could amount to almost a third of the business in the United States and that biz has been flattish to downish for some time now.

Instead of shopping, many consumers are home trying to pay down credit-card bills. They’re worried about losing their jobs. But Britt Beemer says none of us is immune to a good deal.

Beemer: Even though consumers are strapped today, Americans can still be lured into stores if the price is low enough.

The question is, how much lower can Costco go?

I’m Janet Babin for Marketplace.

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