According to Wall Street analysts, Costco Wholesale’s ( COST ) soft March sales late last week and the subsequent decline in its stock price offer an opportunity to buy shares of the retailer on weakness — we share a view. Costco said late Wednesday that overall same-store sales fell 1.1% in March, as members of the wholesaler cut back on discretionary items such as home furnishings and jewelry. The decline in sales, which may also have been influenced by unfavorable seasonal weather in California, sent shares down nearly 3% the next day. The stock has since recovered most of those losses, but is still down about 0.7% from Wednesday’s closing price, settling at $493.83 per share on Monday. But now is the time to “buy the March noise,” JP Morgan analysts wrote in a research note on Monday. “We see this disappointment as an opportunity to buy a global growth prime asset with COST, a rare combination of a sector operator in one of retail’s best sectors.” JPMorgan forecast that core comparable sales in the US would rise up to 5% in April, compared with a 1.5% decline last month. Separately, analysts at TD Cowen see the decline in Costco stock as a “buying opportunity.” In a research note on Monday, they highlighted a catalyst from the retailer’s solid traffic trends, ongoing strong demand for food and a possible special dividend as why the company remains a top pick for 2023. As a membership-only model that offers competitive pricing, TD Cowen analysts argued, “COST provides an inflationary solution that can partially offset softness in big-ticket discretionary items.” Club idea “Costco is a company that says business as usual. The good thing is, business as usual means not selling it,” Jim Cramer said Monday. “If you look at the number, and you sell here, you’re probably missing out on what could be a nice pivot,” he added. More broadly, we’re encouraged to see analyst optimism around Costco, despite a drop in sales last month. And we’re not worried about slow months. Costco has the flexibility to shift inventory and bring in better-selling items in the spring, eliminating seasonal headwinds. We also note that, while timing remains uncertain, membership-fee increases and special dividend increases are two potential catalysts on the horizon. Overall, we remain confident that Club Holdings is the perfect retailer to own in a slow economy, given its ability to offer its members the most competitive prices. It should also see profit margins supported by softer costs for freight, trucking and chemicals. (Jim Cramer’s charitable trust is long-expense. See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim trades. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charitable trust portfolio. If Jim is talking about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. The above Investing Club information is subject to our terms and privacy policy, together with our disclaimer. No fiduciary obligation or responsibility exists, or is created, by reason of your receipt of any information provided in connection with Investing Club. No specific results or profits are guaranteed.
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Costco WholesaleAccording to Wall Street analysts, its ( COST ) soft March sales late last week and the subsequent drop in its stock price offer an opportunity to buy the retailer’s shares on weakness — a view we share.