MarketPulse: Retailers See Red as Costco Crumbles on Earnings Miss


MarketPulse: Retailers See Red as Costco Crumbles on Earnings Miss – Costco and Shopify fell sharply, keeping retailers on the back foot even as data showed U.S. consumers didn’t hold back on spending last month.

Costco Wholesale (NASDAQ:COST) reported mixed results for its fiscal first quarter. Sales beat, but earnings fell short of expectations, which sent the retailer’s shares spiralling more than 8%.

But RBC Capital Markets recommending buying the stock on pullback, citing “healthy” growth in store traffic.

Costco has been ramping up spending to compete against rivals like Amazon’s Whole Foods and Walmart’s Sam’s Club., pressuring gross margins, which fell about 50 basis points to 10.75% during the quarter.

“The company said fulfillment costs are also pressuring core gross margin, and we believe price investments continue to be a headwind,” Stifel said in a note.

E-commerce platform Shopify (NYSE:SHOP) tapped the equity market to raise cash to fund its growth strategies, offering 2.6 million Class A subordinate voting shares. Its shares fell more than 9%.

The duo’s sharp losses offset data showing overall retail sales rose 0.2% in November, topping forecasts, according to the Commerce Department.

The SPDR S&P Retail ETF (NYSE:XRT) was down 0.44% on the day and is off about 18% in the last three months.

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