[Fox Business] Costco bucks trend: Surge in foot traffic despite tough economy

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Numerous retail executives have continually reiterated how tough economic conditions continue to strain consumer budgets, leading to dampened discretionary spending and prompting companies to cut prices just to drive in-store and online traffic. 

However, recent data from Placer.ai shows Costco had a boost in visits during the first quarter, with traffic up 8.9% year over year. In February, visits were up 10.9%. Over the next two months, visits were up 10.5% and 9.2%, respectively, compared to the same time a year ago. 

Regardless of what’s happening in the macroeconomy, the company continues to consistently increase traffic and its market share, UBS analysts wrote in a research note led by Michael Lasser.  

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The analysts estimated the company would report net sales will grow by 8% during the third fiscal quarter due partly to new member growth, rising traffic and new store openings. 

The company is scheduled to announce its third-quarter results Thursday after the bell. 

“Given the continued economic strain on consumers, we believe that Costco’s executive membership penetration likely remained strong as people looked to maximize their spending power,” the analysts wrote.

They anticipate the company will “continue to appeal to a cash-strapped consumer and has a potential catalyst in place with a membership fee hike likely this year.” 

However, the analysts noted that foot traffic at the membership warehouse grew an average of 5% during various economic conditions, both when consumers were flush with cash from the pandemic and when the “macro backdrop took a step down” in 2023. Even today, although the macro “has remained volatile” so far this year with “consumer budgets stretched,” the company increased its traffic an average of 5% year to date, according to UBS analysts. 

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Telsey Advisory Group Senior Managing Director Joe Feldman told FOX Business its traffic stays “so consistent because of the membership model, which yields predictable behavior from members.” 

Feldman further noted that “people tend to increase their shopping at Costco as their membership ages.” 

On top of that, “new clubs generate new members, and the pattern repeats,” he added.

Placer.ai data showed how membership wholesale chains “generally outperformed classic superstore banners Target and Walmart during the first four months of the year.” 

Visits to Walmart-owned Sam’s Club, BJ’s and Costco were up every month on a year-over-year basis, but Costco is still “maintaining its lead in the space,” Shira Petrack, Placer.ai’s marketing content manager, wrote in a blog post earlier this month. 

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Petrack credited some of the success of wholesale clubs to “the makeup of their visitor base.” 

“Costco, Sam’s Club and BJ’s tend to serve a large share of consumers from family households, and these may be opting for more buying in bulk in an effort to stretch budgets,” Petrack wrote. 

In September 2023, Petrack noted that Costco had been “on a roll,” and that it seemed “to have recovered from the headwinds facing the wider retail space” earlier in the year.

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