Costco misses quarterly revenue estimates as demand slows for discretionary goods

By Granth Vanaik

(Reuters) -Costco Wholesale Corp missed second-quarter revenue estimates on Thursday, as consumers turned frugal on discretionary spending amid persistently high inflation, sending its shares down about 3% in after-hours trading.

Major U.S. big-box retailers are seeing a slowdown in demand for discretionary items such as toys, electronics and home goods as higher interest rates and surging food prices force consumers to look for more needs-based consumable goods that are pocket-friendly.

"We've seen some weakness in what I'll call big-ticket discretionary items," said finance chief Richard Galanti, adding electronics, jewelry and housewares, among others, were the worst performers in February and in the reported quarter.

Several U.S. retailers have in recent weeks commented on how Americans have been changing their shopping patterns and seeking out more bargains and discounts as they deal with inflation levels that haven't been seen in a generation.

Retail bellwether Walmart Inc warned last week consumers were increasingly shifting towards more food and consumable products from general merchandise.

In an post-earnings call, Galanti added "most major departments in general were down, with fresh foods being down a little more than others."

The company's total revenue for the quarter rose 6.5% to $55.27 billion, but fell short of estimates of $55.54 billion, according to Refinitiv data.

The membership-only retail chain's mixed quarterly results "indicates that sales growth possibly hasn't kept pace with inflation and consumer traffic," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

Net income attributable to Costco rose to $1.47 billion, or $3.30 per share, in the quarter ended Feb. 12, from $1.30 billion, or $2.92 per share, a year earlier.

Costco's quarterly revenue from memberships, priced between $60 and $120 per year and which account for most of its gross margin, rose to $1.03 billion from $967 million a year earlier.

(Reporting by Granth Vanaik in Bengaluru; Editing by Krishna Chandra Eluri)