What happened

Costco Wholesale (COST -1.64%) investors were in the red on Friday. The retailer's stock fell 2% by 3 p.m. ET compared with a 0.6% decline in the S&P 500. That drop pushed the stock down further in 2022, although shares are modestly outperforming the market's 13% loss so far this year.

Friday's dip came as investors grew more concerned about Costco's upcoming earnings report.

So what

The retail giant is slated to announce fiscal first-quarter results on Dec. 8, and expectations are muted heading into the report. Yes, Costco is still growing sales. Shoppers are increasingly visiting its warehouses as they look for ways to minimize the impact of inflation.

But there are indications that consumer spending may be slowing in important niches like apparel, home furnishings, and electronics. In mid-November, competitor Target cited an "increasingly challenging environment" as management lowered its 2022 outlook.

Now what

Costco has several assets that make it less susceptible to a spending pullback than peers like Target. Most of its profits come from subscription fees, for one. Its price leadership position also makes it popular destination during tougher economic times. And the retailer's warehouse environment helps it avoid the type of price-cutting that Target had to implement to clear out slower-moving inventory.

Still, watch Costco's customer traffic metrics next week for signs of stress on the business. The chain's renewal rate will also be critical to follow as the company prepares for its next round of membership fee hikes. These increases occur sporadically, but they immediately jolt Costco's bottom line. The retailer is currently focused on delivering as much value as it can to shoppers, and success there will lay the groundwork for a fee increase potentially in 2023.