Will Costco have to change with the times?

Two years ago, my wife and I walked out of our local Costco Wholesale Corp. (COST) because the checkout lines were too long. That's not a problem any longer.

On weekends, the place seems busier than a beehive but it is less crowded than it used to be. People -- mostly middle class from what I can tell -- saunter up and down the warehouse store with a year's supply of toothpaste, laundry detergent and the biggest chocolate cakes you have ever seen in your life stuffed into their carts. Of course, there are the free samples. My favorite sample provider is the "crab man." He is an elderly gentleman who pushes seafood dip and bellows in a voice that sounds like it has gargled with rusty nails for decades "you don't have to be a crab to like crabs." Top that off with the $1.50 hot dog-and-soda lunch special and you have got a full afternoon.

Or do you?
Costco sales were down 6 percent in June. U.S. same-store sales plunged 6 percent, and international sales fell 3 percent. Though that was in-line with Wall Street expectations, it does underscore the problems facing this former Wall Street darling whose shares have dropped 12 percent this year. The bargain-hunting consumers that fueled Costco's growth are shopping at Wal-Mart Stores Inc. (WMT).

Costco can be an infuriating place to shop. Merchandise that's there one week isn't there the next. Sizes of some goods are just too large to be practical for most families without a spare refrigerator or freezer or two. But Costco is hardly alone in its troubles.

Many retailers today reported weak June sales as consumers continued to be reluctant to part with their cash because of their worries about the economy. Reuters notes that among the companies posting disappointing results were Wet Seal Inc., (WTSLA), where same-store sales dropped 11 percent, The Children's Place Retail Stores Inc. (PLCE), whose same-store sales plunged 12 percent, and Stage Stores Inc. (SSI), whose comp sales plummeted 12.6 percent.

Economists are predicting that the U.S. will begin to claw its way from the recession in September. Maybe the "crab man" will be able to expand his product line.
Read Full Story
  • DJI28363.66152.840.54%
  • NIKKEI 22523474.27-165.19-0.70%
    Hang Seng24786.1331.710.13%
  • USD (PER EUR)1.18-0.0007-0.06%
    USD (PER CHF)1.10-0.0007-0.07%
    JPY (PER USD)104.920.08100.08%
    GBP (PER USD)1.31-0.0003-0.02%

From Our Partners