COSTCO and the RICH

Those of us who invest as a profession continue to worry about the impact of weakening consumer sentiment caused by the sub-prime debacle -- regardless of what the market is and is not doing in the short term.   We are especially weary of the retail sectors where all of this plays out big time.  But not all retailers are the same, and not all are affected equally by the credit crunch.  And, here is where bold investors find winners.

Costco is one such winner.  They just announced an almost 5% increase in net income for their third quarter, and their share price is now at an all-time high.  Indeed, Costco is one of the few good news stories in retail in the last months.  It is certainly doing much better than such competitors as Sam's Club, BJ's, and the like. 

The principal reason it is doing so well and doing so much better than many other retail companies is that it serves primarily rich consumers.   The store sells high-end products from wine to diamonds to plasma TVs, in addition to more basic but excellent warehouse wares, and its customers are not directly, or mostly even indirectly, affected by credit concerns in the economy.  Costco has certainly set itself apart from similar retail operations and it shares immunity with other high-end retailers.  It is a strong stock to own at this time.   It is a strong stock to own at almost any time. 

Read the Wall Street Journal article on its third quarter results.

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Comments

  • Aldus

    October 11, 2007

    Costco serves rich customers? Huh? Is that true?

  • jonathan

    October 11, 2007

    Sure does. Just compare who is shapping at Sam's Club and Costco in almost any city. The difference is impressive.

  • lizbeth

    October 11, 2007

    I think a lot of different groups shop there. But, I shop there as well as at Tiffany as do many of my friends. The high-end stuff is very high quality and the prices (and return policies!) are wonderful.

  • dirt poor

    October 11, 2007

    i shop at costco. name explains my financial situation

  • lizbeth

    October 11, 2007

    That's my point. It meets all needs. But the extra point made by Freedman is that they do so well because a lot of shoppers are well heeled.

  • Tijeras Girl

    January 23, 2010

    Costco has good prices...I bought a back up hard drive with a 5 star rating much cheaper than on Amazon...not bed! We also shopped for a big screen TV for about a year...found a deal at Costco we could not refuse.

    They also have quality foods. We are not rich...but I am a value shopper, I want the most bang for my buck, but I dont want junk either.

    The store is always clean and the coupon books they send out are helpful too.

    VALUE & QUALITY=COSTCO. I was a loyal shopper in Los Angeles before we relocated, and now shop COstco in NM, and also when I visit my folks in Ohio. Costco has alot to offer...on all levels.

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