What happened

Shares of Costco Wholesale (COST -0.69%) fell 6.6% on Thursday after the retailer announced a surprise drop in e-commerce sales.

So what

Costco's net sales for the four weeks ended Nov. 27 rose 5.7% year over year to $19.17 billion. The company's pace of expansion decelerated markedly from the 7.7% growth it experienced in September and the 10.1% increase it posted in October. 

Costco's comparable-store sales (comps) grew by 4.3%. Excluding changes in gasoline prices and foreign exchange rates, the discount warehouse chain's comps increased by 5.3%. Wall Street had expected comps growth of 7.7%. 

The sales shortfall sparked concern among investors that inflation and fears of a potential recession are driving consumers to pare back their discretionary spending. That could spell trouble for Costco's holiday-quarter results.

Particularly worrisome were the retailer's online revenue figures. Costco's e-commerce sales declined by 10.1% in November after rising sharply earlier in the pandemic.  

Now what

Higher costs for food, shelter, and energy are forcing many people to seek out bargains whenever possible. Costco has benefited from this trend in some ways. The warehouse-store chain's large array of low-priced food items has allowed it to profit as more shoppers chose to eat at home, rather than dine out. And Costco's discounted gasoline helped to drive more traffic to its stores.

But with people needing to prioritize food and other vital purchases, they now appear to be spending less on Costco's larger selection of discretionary merchandise.

Investors can expect to receive an update on these trends when Costco reports its fiscal 2023 first-quarter earnings results on Dec. 8.