Consumer sentiment has been declining in recent months, fueled into overdrive by soaring uncertainty on tariffs and trade. This “soft data” view on consumer sentiment is starting to show up in hard data.
That includes monthly sales data from retailers, who are starting to show some weaker demand. For now, this trend could mean retailers trade weakly, but some companies will hold up better than others.
For instance, warehouse giant Costco (COST) is seeing declining store visits. However, Costco tends to hold up more strongly than other retailers.
Over the past year, Costco has still had robust sales, with a 9% revenue increase and 3% earnings growth. Costco’s strategy of having a strict markup on the goods that it sells, combined with revenue from membership sales, allows it to earn a more consistent profit than other retailers.
While Costco carries a somewhat high valuation at over 40 times earnings, Costco’s leadership in the retail space makes it a more defensive play in the uncertain retail space.
Action to take: Costco shares are still well off their 52-week highs and trending higher. Shares could have some more upside for low-double-digit returns over the next few months.
For traders, the July $1,100 calls, last trading for about $13.35, could see mid-double-digit returns over the coming weeks if the current rally holds.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.