Thursday morning was another positive one on Wall Street, extending the recent bullish run for major market benchmarks. The latest move higher came after the Federal Reserve announced further extraordinary measures to provide liquidity for the financial system, adding details on existing programs and opening up the potential for more financing for small and midsize businesses, local governments, and others hit hard by the coronavirus pandemic. As of 11 a.m. EDT today, the Dow Jones Industrial Average (^DJI 1.63%) was up 306 points to 23,739. The S&P 500 (^GSPC 2.13%) rose 37 points to 2,787, and the Nasdaq Composite (^IXIC 2.89%) gained 28 points to 8,119.
Even with the Fed's latest moves, the COVID-19 outbreak continues to bring extensive economic disruptions. Costco Wholesale (COST 0.75%) has seen the effect. Its customers are ramping up their buying in anticipation for long periods of staying at home, and that became clear in its March sales numbers. For coffee giant Starbucks (SBUX 1.95%), though, the effects haven't been as benign, and it's making dire predictions about how much its profits could fall.
Buying out the store
Shares of Costco Wholesale were down almost 2% Thursday morning, falling despite what would have seemed like upbeat sales news under ordinary circumstances. The numbers that Costco posted showed much larger gains than are typical for the warehouse retailer, but they still weren't quite as good as some had hoped.
Overall revenue climbed 11.7% to $15.5 billion for the company's March period, officially defined as the five weeks ending April 5. Comparable-store sales jumped by 9.6% from year-ago levels. Domestically, comps climbed 10.7%, with a 1.2% rise in Canada weighing down the 12.2% comps increase in the rest of the world. E-commerce-related sales soared 48% for the period year over year.
The gains were especially impressive given that gasoline prices have been trending downward. When you take out the impact of gas prices and foreign exchange, Costco's adjusted comps jumped 12.3%, with e-commerce hitting nearly 50% growth.
Even with much of the retail industry at a standstill because of the pandemic, Costco is still looking to expand, with plans to open a new store in China near Shanghai. Combine that with shoppers wanting to stock up on essentials, and Costco has once again proved its leadership in warehouse retail.
Cutting right down the middle
Shares of Starbucks were up about 1% as investors seemed resigned to discouraging news about the coffeehouse chain's prospects for its fiscal second quarter. A preliminary report from the company confirmed the dire prognosis that most shareholders had already expected.
Starbucks gave details about the effect of the pandemic so far. In the U.S., comps growth had been running at 8% through March 11, but by the end of March, weekly comps were falling 60% to 70% year over year. The company sees that adding up to about a 3% decline in comps for the quarter overall.
The effect on Starbucks in China came earlier and cost the company $0.15 to $0.18 per share in earnings for the quarter. It now expects adjusted earnings of $0.32 per share, down 47% from the results the coffee giant announced in last year's fiscal second quarter.
Unfortunately, Starbucks doesn't see a quick end to the economic pain from the pandemic. It believes the impact on the fiscal third quarter will be significantly larger, and it's likely to extend at least into the fiscal fourth quarter. Although Starbucks is seeing some recovery in China as that nation moves past the worst of the outbreak (at least so far), it could take awhile for shareholders to see that optimism come through in the financial numbers.