Last week, Costco Wholesale (NASDAQ:COST) released its second-quarter earnings numbers, which weren't all that impressive. While the big-box retailer has generally fared well amid the pandemic and rising inflation, there are cracks starting to show.
Revenue of $55.27 billion in Q2 came slightly below the $55.54 billion that analysts were expecting. The good news is that on a year-over-year basis, the top line was still up 6.5%.
The company's chief financial officer, Richard Galanti, noted that, "we've seen some weakness in what I'll call big-ticket discretionary items." With demand seemingly slowing down, it could be a sign that even Costco may not be as resilient as it has been in the past. The positive is that the business' net income totaled $1.47 billion for the quarter, which was 13% higher than in the same period last year.
Costco's stock fell 20% last year but so far in 2023, it has been rallying along with the markets. However, with the stock trading at more than 35 times earnings, it isn't a cheap buy. And now with the company potentially heading into some more challenging market conditions, investors may be less inclined to pay a premium for the business. And its light 0.7% dividend yield doesn't offer much of an incentive to hold onto the stock for the recurring income, either.
While Costco is a good long-term buy, I wouldn't buy the stock right now as 2023 could be another tough year for it given its hefty price tag and the fact that demand appears to be slowing.
