"You know, a little bit," longtime Costco CEO Craig Jelinek told Yahoo Finance (video above) when asked if he sees signs of a recession forming in the U.S. "Our jewelry business has slowed down. If you look at the really high-end television sets, they've slowed down. I think right now people are very, very value-conscious. They're always value-conscious, but I think more so now than ever."
Costco didn't have a perfect sales record in November (though sales were still relatively impressive) as shoppers spent more cautiously amid news of increasing layoffs and stubbornly high inflation.
The retail giant's same-store sales growth cooled versus October, the company reported on Nov. 30.
"Look, over the last six or eight months as there's been inflation and concerns of recession, my answer is: It rains on everyone, maybe it drizzles on us, not hard rain," Costco CFO Richard Galanti told Yahoo Finance. "And so we've done a little better than our peers. This [month] was a slight downtick in those numbers. I've been through this rodeo many times over 38 years. We are just going to keep working to drive sales and drive value."
Investors still punished the often-Teflon stock on the view 2023 would bring further sales slowdowns.
"Like others in retail, Costco is experiencing a macro-driven dichotomy between consumables and discretionary comps, with the former 'squeezing out' the latter," Guggenheim analyst John Heinbockel explained in a note to clients. "More so than some, last year’s supply chain-inspired demand pullforward may have been a greater weight on the larger-ticket discretionary categories."
Heinbockel said he sees better same-store sales for Costco in 2023 as the retailer continues to seize market share from traditional grocery stores.
To be sure, 2023 is shaping up as an economic wildcard for companies to navigate. There are investment banks such as Goldman Sachs that see a 35% chance of a U.S. recession in 2023, although others are far more pessimistic.
"As we survey the prospects for the global economy, we see many reasons for concern, including continued challenges from the pandemic and the Russia-Ukraine war, high inflation, and headwinds from central bank rate hikes," Citi Chief Economist Nathan Sheets wrote in a recent note. "Reflecting these factors, the global economy is likely to endure 'rolling' country-level recessions during the coming year."
Citi expects the eurozone and U.K. to enter a recession by the end of this year. The U.S. stands to enter a recession by mid-2023, Sheets believes, as the full impact of higher interest rates from the Federal Reserve is felt by consumers and businesses.
Meanwhile, BNP Paribas has also outlined a tough road ahead for the global economy.
"We expect a downturn in global GDP growth in 2023, led by recessions in both the U.S. and the eurozone, with below-trend growth in China and many emerging markets," the BNP strategy team said in a note of its own this month.