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Is Costco Broken?
By looking at its stock
, trading right around all-time
, you would never suspect that Costco Wholesale may not be
what it once was.
To suggest otherwise is heresy
Wall Street, especially if you throw in the company’s fortress-
balance sheet and cash flow statements. And
not forget that dividend.
But
retailers, you also have to look same-store sales — usually defined
sales of stores open more
a year. And at Costco, if you go back more than a year — and strip
the impact of gas inflation and foreign currencies — sales have been
a slow bleed for more than a year, slipping to 5 percent last month.
Add back gas and foreign currency, and they’re
freefall — a disappointing 3 percent last month, a quarter of
it was a year earlier. And while renewal rates
robust, in the past quarter there was a pronounced deceleration
shopper frequency.
All of which
the question: Is Costco broken?
Remember, we’re talking
one of the best companies in America and certainly one of the greatest retailers in the
. With only a few exceptions, its revenue growth
back to the early 1990 has been
the double-digits. Part of that is the result
a steady stream of new store openings in
U.S. and abroad, rising membership fees and uncanny customer loyalty.
But
a company as good as Costco isn’t immune to forces
its control.
And
not broken, the question you’ve
to ask: Has something outside of macro economic forces changed
enough to affect the company
the margin?
In this
, I believe the “on the margin” is something
intangible: A shift in demographics — more
, the aging McMansion baby boomer population that has evolved
downsized empty-nesters.
This is a theory I concocted in
because I am one of
. The very notion of this lit
my Twitter, Facebook, and Google+ accounts when I floated the idea
recently.
The reason is simple: As almost anybody in
increasingly non-exclusive but continuously growing club (confirmed by Census Bureau stats) can say: We simply don’t buy as
at Costco as we used to. My wife and
maintain the Costco membership we
had since we first signed
in 1991 at the San Ramon, Calif., store. But our kids are
of the house and we just don’t need as much stuff — certainly less stuff
bulk.
Adapted and abridged from: CNBC, July 13, 2012.
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