Costco CEO weighs in on the great recession debate

Costco CEO weighs in on the great recession debate

Costco (COST) had a tremendous year in a difficult economic climate. But even Yahoo Finance’s Company CEO of the Year sees some storm clouds brewing in 2023.

“You know, kinda,” longtime Costco CEO Craig Jelinek told Yahoo Finance (video above) when asked if he saw signs of a recession in the United States. “Our jewelry business has slowed down. If you look at the very high-end TVs, they’ve slowed down. I think right now people are very, very values ​​conscious. They’re still values ​​conscious, but I think that more now than ever.

Costco didn’t have a perfect sales record in November (although sales were still relatively impressive) as shoppers spent more cautiously amid news of rising layoffs and stubbornly high inflation.

GLENDALE, CALIFORNIA – MARCH 14: People push shopping carts in line in the rain while waiting to enter a Costco Wholesale store on March 14, 2020 in Glendale, California.  The line had hundreds of shoppers, but moved quite easily and shoppers were eventually able to enter the store to make purchases.  The state of California is reporting at least 247 confirmed cases of COVID-19 with five deaths.  Many more are carriers of the coronavirus but have not been tested, officials say.  (Photo by Mario Tama/Getty Images)

People line up in the rain waiting to enter a Costco Wholesale store on March 14, 2020 in Glendale, California. (Photo by Mario Tama/Getty Images)

The retail giant’s same-store sales growth slowed from October, the company said Nov. 30.

“Look, over the last six or eight months, when there’s been inflation and recession fears, my answer is, it’s raining on everybody, maybe it’s raining on us, not pouring rain,” Costco chief financial officer Richard Galanti told Yahoo Finance. “And so we did a bit better than our peers. [month] was a slight drop from those numbers. I’ve been to this rodeo many times in 38 years. We’ll just keep working to drive sales and create value.”

Investors have always punished stocks often teflon, thinking that 2023 will bring further slowdowns in sales.

“Like others in retail, Costco experiences a macro dichotomy between consumables and discretionary components, with the former ‘eliminating’ the latter,” Guggenheim analyst John Heinbockel explained in a note to clients. “More than some, last year’s supply chain-inspired demand surge may have weighed more heavily on the larger discretionary categories.”

Heinbockel said he expects better same-store sales for Costco in 2023 as the retailer continues to take market share from traditional grocery stores.

Admittedly, 2023 promises to be an economic joker for companies. Some investment banks such as Goldman Sachs see a 35% chance of a US recession in 2023, although others are much more pessimistic.

TETERBORO, NEW JERSEY - AUGUST 18: Exterior view of a Costco store on August 18, 2020 in Teterboro, New Jersey.  On Thursday, Costco Wholesale (COST) stock hit the upper 90 percentile with an improvement to 93 from 89 the previous day.  (Photo by Kena Betancur/VIEWpress)

Exterior view of a Costco store on August 18, 2020 in Teterboro, New Jersey. (Photo by Kena Betancur/VIEWpress)

“As we examine the outlook for the global economy, we see many reasons for concern, including the lingering challenges of the pandemic and the Russian-Ukrainian war, high inflation and headwinds from rate hikes in the central bank,” wrote Citi chief economist Nathan Sheets. a recent note. “Reflecting these factors, the global economy is likely to experience ‘continuing’ recessions at the country level over the coming year.”

Citi expects the Eurozone and the UK to fall into recession by the end of this year. The United States is expected to enter a recession by mid-2023, Sheets estimates, as the full impact of the Federal Reserve’s interest rate hikes is felt by consumers and businesses.

Meanwhile, BNP Paribas has also charted a difficult path for the global economy.

“We expect slower global GDP growth in 2023, driven by recessions in the United States and the eurozone, with below-trend growth in China and many emerging markets,” the report said. BNP strategy team in a personal note this month.

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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