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Costco (COST) is trading lower Friday after the company reported mixed earnings results for the fiscal second quarter, missing profit estimates but beating on revenue. The company notes that fresh groceries were the most inflationary category during the quarter.
Seana Smith and Madison Mills discuss the details on Morning Brief, explaining how pressures from inflation and tariffs have impacted consumer spending.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
This post was written by Sydney Strauss
All right, let's move on to Costco. Read on the consumer reporting mixed results for the fiscal second quarter. The wholesale are warning of a cautious consumer spending due to inflation. The potential impact of tariffs. The company saying the fresh groceries were quote the most inflationary category in the quarter that was driven by higher prices for meat, for bakery goods and for eggs. You're looking at losses of just about nearly a two point or 2.7% dip here in pre-market trading. I think the big question is when you take a look at a name like Costco Maddie, I think many investors may be initially think that they would actually be able to weather some of these headwinds if consumers are pulling back on their spending. Maybe they are looking for more of those deals, ones that you would get at Costco. But the fact that we are seeing some signs of deterioration or trepidation, concern here amongst consumers when it comes to their wallet, this could be a larger signal just in terms of what could be in store here over the next several weeks as we do hear from some more of these larger retailers.
I think it's interesting to see the degree of the sell off given how positive some of the analysts still remain on the print here. You had Baird talking about how to your point they are well positioned to handle any policy risks moving forward here and that they had strong numbers when it comes to performance indicators like comp sales traffic membership growth. You also had JP Morgan saying that they have continued global momentum in the business and the fundamental story for Costco challenges all of the other best companies in their coverage. That is a huge positive sign for the stock, I would imagine, and JP Morgan maintaining their overweight on the stock. But of course, it sounds like because of the just numbers coming in from this print that were a little bit disappointing here, especially given that second quarter profit trailing estimates. That's what's driving the stock down though the long term and more fundamental story for the business could be a positive lift as we head through the rest of the year here.