July 11 - Costco bucks the trend of soft discretionary sales. Fred Katayama reports.
Consumers are shying away from buying stuff that's not essential, but not at discounter Costco. Sales at its stores open at least a year grew 6 percent in the last five weeks, beating expectations. And it managed to get customers to buy a lot of discretionary items like appliances and clothing as well as staples like fresh food. That's a sharp contrast to results at some apparel retailers and discounter Family Dollar, which saw sharp drops in quarterly sales of non-necessities. Janney Capital Markets analyst David Strasser praised Costco's consistency, writing, "What is clearly a weaker global retail environment will allow Costco to sustain its industry leading multiples. They are showing consistency, strength, and market share gains in a weakening and increasingly weaker retail environment." The warehouse retailer even managed to pull in shoppers despite the heat wave hitting the West Coast. Its stock, which has tripled since March of 09, rose at the start of trading. While discretionary spending is under pressure, Wall Street thinks consumer spending will be healthy, and many analysts are bullish about Costco's prospects with its consistent ability to pull in traffic.