The Real Reason Costco's Sales Are Slumping

If any company has been able to make lemonade out of the lemons that is the coronavirus pandemic, it's Costco. The warehouse store saw a surge in customers last month, particularly during the days before lockdowns took effect in different parts of the country, and thanks to our need to stockpile everything from toilet paper and household cleaners to canned goods and... oat milk, that panic-buying spree actually bumped Costco's sales last month up by 12.3 percent in comparable sales (via Fox News). However, as of April 9, the warehouse store's shares were down almost 2 percent.

"The initial response to the pandemic led to significant sales and traffic increases in our warehouses as we disclosed last month's concerning sales in the last week of February. Those increases extended midway through the March reporting period," David Sherwood, assistant vice president of finance and investor relations for Costco said (via MarketWatch).

Social distancing measures have hurt Costco's bottom line

But even though retail analysts say Costco has and will continue to ride the crest of a pandemic-driven demand wave for the foreseeable future, the store's social distancing measures, reduced hours, and the closure of departments that were considered "non-essential" — like jewelry, optical, and hearing aids — have together had a joint impact on the store's revenues. "These developments slowed sales as compared to the first half of March," Sherwood said.

While the store saw stocks of items like alcohol and essentials like household cleaners, food, water, toilet paper fly off their shelves, retail analysts say a likely slowdown in buying of non-essentials would have hurt the company, too. And while Costco's earnings are still solid, the market is "disappointed relative to heightened expectations."

Still, that disappointment is expected to wear off, since Costco's membership base isn't just solid, the number of memberships have actually gone up (via MarketWatch). The company is also improving its digital and e-commerce platforms, which is only expected to help its customers and keep the company healthy.